Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7. INCOME TAXES

Income tax expense (benefit) includes the following components:

	Federal			State			Foreign		Total
2021
Current	$	126,840		$	54,484		$	328,137	$	509,461
Deferred		(3,981	)		291			—		(3,690	)
	$	122,859		$	54,775		$	328,137	$	505,771
2020
Current	$	37,551		$	18,432		$	193,996	$	249,979
Deferred		8,440			(69	)		—		8,371
	$	45,991		$	18,363		$	193,996	$	258,350
2019
Current	$	35,324		$	13,711		$	150,261	$	199,296
Deferred		3,149			1,333			—		4,482
	$	38,473		$	15,044		$	150,261	$	203,778

The components of earnings before income taxes are as follows:

	2021		2020		2019
United States	$	823,009	$	325,009	$	327,878
Foreign		1,101,607		631,555		467,916
	$	1,924,616	$	956,564	$	795,794

Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 21% when compared to earnings before income taxes as a result of the following:

	2021			2020			2019
Computed “expected” tax expense	$	404,169		$	200,879		$	167,117
Increase (decrease) in income taxes resulting from:
Effect of foreign taxes		46,644			48,584			26,599
State income taxes, net of Federal income tax benefit		43,272			14,507			11,885
Nondeductible executive compensation		8,981			4,324			2,838
Stock compensation expense, net		(6,238	)		(8,461	)		(2,689	)
Other, net		8,943			(1,483	)		(1,972	)
	$	505,771		$	258,350		$	203,778

The Company's effective tax rate in 2021, 2020 and 2019 benefited from significant share-based compensation deductions. In 2021, 2020 and 2019, the Company also benefited from U.S. Federal tax credits totaling $27.9 million, $16.7 million and $15.7 million, respectively, principally because of withholding taxes related to the Company's foreign operations, as well as U.S. income tax deductions for Foreign-derived intangible income (FDII) of $22.6 million, $10.0 million and $9.0 million, respectively. These amounts were partially offset by the effect of higher foreign tax rates of the Company's international subsidiaries, when compared to the U.S. Federal income tax rate of 21%, as well as certain expenses that are no longer deductible under the 2017 Tax Act, including certain executive compensation in excess of amounts allowed. The Company treats BEAT and GILTI as components of current income tax expense. For the years 2021, 2020 and 2019, there was no BEAT expense and GILTI expense was insignificant. In 2019, the Company received state income tax refunds totaling approximately $4 million.

The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:

Years ended December 31,	2021		2020
Deferred Tax Assets:
Deductible stock compensation expense, net	$	11,291	$	14,265
Operating lease liabilities		67,065		52,223
Accrued third party obligations, deductible for taxes upon economic performance		6,504		6,242
Excess of financial statement over tax depreciation		9,182		8,123
Foreign currency translation adjustments		8,729		4,604
Retained liability for cargo claims		1,430		1,128
Provision for credit losses on accounts receivable		2,168		954
Total gross deferred tax assets		106,369		87,539
Deferred Tax Liabilities:
Unremitted foreign earnings, net of related foreign tax credits		41,560		43,805
Operating lease assets		64,080		49,865
Deferred contract costs		—		917
Total gross deferred tax liabilities		105,640		94,587
Net deferred tax (liabilities) assets	$	729	$	(7,048	)

Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of December 31, 2021 and 2020.

The Company is subject to taxation in various states and many foreign jurisdictions including the People’s Republic of China, including Hong Kong, Taiwan, Vietnam, India, Mexico, Canada, Netherlands and the United Kingdom. The Company believes that its tax positions, including intercompany transfer pricing policies, are reasonable and consistent with established transfer pricing methodologies and norms. The Company is under, or may be subject to, audit or examination and assessments by the relevant authorities in respect to these and any other jurisdictions primarily for years 2009 and thereafter. Sometimes audits result in proposed assessments where the ultimate resolution could result in significant additional tax, penalties and interest payments being required. The Company establishes liabilities when, despite its belief that the tax return positions are appropriate and consistent with tax law, it concludes that it may not be successful in realizing the tax position. In evaluating a tax position, the Company determines whether it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position and in consultation with qualified tax advisors.

The total amount of the Company’s tax contingencies may increase in 2022. In addition, changes in state, federal, and foreign tax laws and changes, including transfer pricing and changes in interpretations of these laws may increase the Company’s existing tax contingencies. The timing of the resolution of income tax examinations can be highly uncertain, and the amounts ultimately paid including interest and penalties, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts recorded. It is reasonably possible that within the next twelve months the Company may undergo further audits and examinations by various tax authorities and possibly may reach resolution related to income tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to the Company’s contingencies related to positions on tax filings in future years. The estimate of any ultimate tax liability contains assumptions based on experiences, judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by the taxing jurisdiction. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant for the years ended December 31, 2021, 2020 and 2019.