Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax provision (benefit) for the years ended December 31, consists of the following (in thousands): 

	2023		2022		2021
Current:
Federal	$	125,875	$	139,423	$	134,111
State	22,340		20,367		14,508
Foreign	53,674		48,165		28,266
	201,889		207,955		176,885
Deferred:
Federal	(18,781)		(12,313)		(2,169)
State	(6,209)		(7,761)		(3,795)
Foreign	(5,069)		4,138		(1,708)
	(30,059)		(15,936)		(7,672)
	$	171,830	$	192,019	$	169,213

The components of Income before income taxes for the years ended December 31, were as follows (in thousands): 

	2023		2022		2021
Domestic	$	614,713	$	750,793	$	698,578
Foreign	252,163		180,440		120,659
	$	866,876	$	931,233	$	819,237

Income tax provision differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate for the years ended December 31, due to the following items (in thousands): 

	2023		2022		2021
Provision at statutory rate	$	182,044	$	195,553	$	172,040
State taxes, net of federal benefit	21,659		19,223		16,568
Foreign rate differential	7,887		3,620		4,303
Foreign derived intangible income	(8,669)		(8,187)		—
Research and development credit	(23,130)		(18,809)		(8,046)
Unrecognized tax benefits including interest and penalties	(9,210)		(11,793)		(6,554)
Valuation allowance adjustments	7,345		6,714		(1,928)
State credits	(8,035)		(6,954)		(5,403)
Global intangible low-taxed income	474		1,607		1,143
Return to provision adjustments	1,057		(6,318)		(8,500)
Executive compensation limitation	8,712		4,893		3,104
Other foreign inclusions	1,563		16,562		34
Tax incentives	(12,996)		(7,202)		(1,307)
Other	3,129		3,110		3,759
Income tax provision	$	171,830	$	192,019	$	169,213

The 2017 Tax Cuts and Jobs Act subjects U.S. shareholders to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries for which a company can elect to either recognize deferred taxes or to provide tax expense in the year incurred. The Company has elected to account for GILTI in the year the tax is incurred.

The Company qualifies for certain tax holidays in Thailand if certain employment and manufacturing criteria are met. The impact of the tax holiday decreased foreign taxes by $13.0 million and $7.2 million in 2023 and 2022, respectively. The benefit of the tax holiday on net income per share (diluted) was $0.09 and $0.04 in 2023 and 2022, respectively.

The principal components of the Company’s deferred income tax assets and liabilities as of December 31, include the following (in thousands):

	2023		2022
Deferred income tax assets:
Accruals not yet tax deductible	$	152,288	$	133,349
Stock compensation	12,995		11,616
Net operating loss and research & development tax credit carryforwards	68,809		63,517
Amortization of research and experimental costs	78,169		43,034
Other	66,749		55,800
	379,010		307,316
Valuation allowance	(48,516)		(40,878)
	330,494		266,438
Deferred income tax liabilities:
Depreciation, tax in excess of book	(57,641)		(49,889)
Pension and postretirement healthcare plan obligations	(82,682)		(58,843)
Withholding tax	(29,904)		(23,632)
Other	(32,597)		(28,561)
	(202,824)		(160,925)
	$	127,670	$	105,513

The Company reviews its deferred income tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

The Company's gross state net operating loss carryforwards were as follows at December 31 (in thousands):

Year of Expiration	2023		2022
2031	$	238,682	$	219,726
2032	12		24
2033	46		46
2034	108		109
2035	1,085		553
2036	60		60
2037	187		195
2038	824		820
2039	11,285		9,375
2040	34,354		31,879
2041	2,135		2,135
2042	347		458
Indefinite	7,280		2,923
	$	296,405	$	268,303

The Company also had Wisconsin research and development credit carryforwards of $53.2 million at December 31, 2023, expiring in 2025-2038.

At December 31, 2023, the Company had a deferred tax asset of $59.3 million related to its state net operating loss and Wisconsin research and development credit carryforwards and a deferred tax asset of $9.5 million related to foreign net operating losses.

The Company's valuation allowance was $48.5 million at December 31, 2023 and included $32.7 million related to state net operating loss and Wisconsin research and development credit carryforwards, $7.8 million related to foreign net operating loss carryforwards and $8.0 million related to other deferred tax assets. The change in the valuation allowance from prior year included an increase of $7.3 million related to state net operating loss and Wisconsin research and development credit carryforwards and an increase of $0.3 million related to foreign operations.

The Company recognizes interest and penalties related to unrecognized tax benefits in Income tax provision (benefit). Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands): 

	2023		2022
Unrecognized tax benefits, beginning of period	$	32,029	$	44,856
Increase in unrecognized tax benefits for tax positions taken in a prior period	3,159		373
Decrease in unrecognized tax benefits for tax positions taken in a prior period	(10,444)		(8,885)
Increase in unrecognized tax benefits for tax positions taken in the current period	870		3,158
Statute lapses	—		(2,753)
Settlements with taxing authorities	(7,400)		(4,720)
Unrecognized tax benefits, end of period	$	18,214	$	32,029

The amount of unrecognized tax benefits as of December 31, 2023 and 2022 that, if recognized, would affect the effective tax rate was $16.5 million and $27.1 million, respectively.

The total gross amount of benefit related to interest and penalties associated with unrecognized tax benefits recognized during 2023, 2022 and 2021 in the Consolidated statements of operations was $8.7 million, $5.6 million and $2.6 million, respectively.

The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 2023 and 2022 in the Consolidated balance sheets was $8.6 million and $17.4 million, respectively.

The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2024. However, the Company is under regular audit by tax authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The Company or one of its subsidiaries files income tax returns in the U.S. federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 2019 or for U.S. federal income taxes before 2020. In all other jurisdictions, tax periods prior to 2017 are closed.