Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 6. INCOME TAXES

Income before provision (benefit) for income taxes consisted of the following:

(in thousands)	Year Ended December 31,
	2021		2020		2019
U.S.	$	121,660	$	131,898	$	129,045
Foreign		96		146		80
	$	121,756	$	132,044	$	129,125

The provision (benefit) for income taxes consisted of the following:

(in thousands)	Year Ended December 31,
	2021			2020			2019
Current:
U.S. Federal	$	(1,692	)	$	23,975		$	11,744
State		5,360			6,545			7,353
Foreign		2,035			1,733			1,616
		5,703			32,253			20,713
Deferred:
U.S. Federal		23,433			(755	)		10,719
State		2,896			(1,424	)		895
Foreign		19			(14	)		(8	)
		26,348			(2,193	)		11,606
Total	$	32,051		$	30,060		$	32,319

The reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2021			2020			2019
U.S. federal statutory rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal benefit		5.1			4.7			5.0
State deferred tax apportionment change, net of federal benefit		1.6			(1.6	)		0.1
Valuation allowance		0.0			0.0			0.0
Share-based compensation		(2.1	)		(1.4	)		(1.6	)
Enactment of the Tax Cuts and Jobs Act		0.0			(0.3	)		(0.1	)
Other		0.7			0.4			0.6
		26.3	%		22.8	%		25.0	%

The following table shows the deferred income taxes related to the temporary differences between the tax bases of assets and liabilities and the respective amounts included in “Deferred income taxes, net” on the Company’s Consolidated Balance Sheets:

(in thousands)	December 31,
	2021		2020
Deferred tax liabilities:
Accelerated depreciation	$	244,141	$	217,125
Prepaid costs currently deductible		6,069		5,039
Other		6,553		5,970
Total deferred tax liabilities		256,763		228,134
Deferred tax assets:
Accrued costs not yet deductible		11,010		9,200
Allowance for doubtful accounts		548		536
Deferred revenues		219		—
Share-based compensation		2,561		2,321
Total deferred tax assets, net of valuation allowance of $0.2 million in 2021 and 2020		14,338		12,057
Deferred income taxes, net	$	242,425	$	216,077

In December 2016, the Company decided to exit the Bangalore, India branch operations of its TRS-RenTelco electronics division.  The wind down of operations in India began in 2017. As a result, a valuation allowance was recorded against the deferred tax assets that resulted primarily from accumulated net operating loss carry forwards in India that management estimated the benefit of which will not be realized.  As of December 31, 2021, the Company’s foreign net operating losses for tax purposes were $0.6 million.  If not realized, these carry forwards will begin to expire in 2023.

For income tax purposes, deductible compensation related to share-based awards is based on the value of the award when realized, which may be different than the compensation expense recognized by the company for financial statement purposes which is based on the award value on the date of grant.  The difference between the value of the award upon grant, and the value of the award when

ultimately realized, creates either additional tax expense or benefit.  In 2021, 2020 and 2019 exercise of share-based awards by employees resulted in an excess tax benefit of $2.5 million, $1.9 million and $2.1 million, respectively.  

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.  For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  The Company evaluated all of its tax positions for which the statute of limitations remained open and determined there were no material unrecognized tax benefits as of December 31, 2021 and 2020.  In addition, there have been no material changes in unrecognized benefits during 2021, 2020 and 2019.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions.  Tax regulations within each jurisdiction are subject to interpretation of the related tax laws and regulations and require the application of significant judgment.  

Our income tax returns are subject to examination by federal, state and foreign tax authorities. There may be differing interpretations of tax laws and regulations, and as a result, disputes may arise with these tax authorities involving the timing and amount of deductions and allocation of income. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2017.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision (benefit) for income taxes in the accompanying Consolidated Statements of Income for all periods presented.  Such interest and penalties were not significant for the years ended December 31, 2021, 2020 and 2019.