Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax provision from continuing operations consists of the following:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Current:
Federal	$	30,274	$	38,801	$	23,333
State and local	5,852		13,541		4,934
Foreign	2,869		4,741		760
	38,995		57,083		29,027
Deferred:
Federal	(1,012)		(13,425)		(3,687)
State and local	1,252		(6,775)		819
Foreign	(2,201)		2,745		3,069
	(1,961)		(17,455)		201
Total:
Federal	29,262		25,376		19,646
State and local	7,104		6,766		5,753
Foreign	668		7,486		3,829
	$	37,034	$	39,628	$	29,228

Income before income taxes from continuing operations consists of the following:

	Year Ended December 31,
(in thousands)	2023		2022		2021
U.S.	$	161,377	$	173,810	$	143,712
Foreign	8,186		20,772		17,058
	$	169,563	$	194,582	$	160,770

A reconciliation from the statutory U.S. federal tax rate to the effective tax rate follows:

	Year Ended December 31,
	2023		2022		2021
Statutory U.S. federal tax rate	21.0	%	21.0	%	21.0	%
Increase (decrease) in rate resulting from:
State and local income taxes, net of related federal taxes	2.9		2.4		2.5
Effect of noncontrolling interest	(3.9)		(3.9)		(4.2)
Derivative instruments and hedging activities	—		(1.3)		0.4
U.S. income taxes on foreign earnings	1.3		(0.1)		0.7
Nondeductible compensation	0.9		1.2		1.9
Unrecognized tax benefits	4.7		8.0		2.1
Foreign tax credits	(2.9)		(2.1)		(1.3)
Research and development and other tax credits	(2.7)		(7.0)		(5.0)
Other, net	0.5		2.2		0.1
Effective tax rate	21.8	%	20.4	%	18.2	%

Net income taxes of $45.7 million, $88.7 million, and $51.7 million were paid in the years ended December 31, 2023, 2022, and 2021, respectively.

TAMH and ELEMENT are treated as partnerships for U.S. tax purposes. Partnerships are not taxable entities so the tax consequences of the partnership’s transactions flow through to the partners (i.e., investors) at their proportionate share. As a result, the Consolidated Statements of Operations do not reflect such income taxes within Net income attributable to the noncontrolling interest.

The Company has elected to treat Global Intangible Low Tax Income (“GILTI”) as a period cost and, therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future years.

For the years ended December 31, 2023, and 2022, the Company has not recognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing and if/when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.

Significant components of the Company's deferred tax liabilities and assets are as follows:

	December 31,
(in thousands)	2023		2022
Deferred tax liabilities:
Property, plant and equipment	$	(66,497)	$	(58,273)
Operating lease right-of-use assets	(8,716)		(9,370)
Identifiable intangibles	(3,565)		(6,802)
Investments	(29,962)		(34,604)
Derivative Instruments	(6,972)		(7,911)
Other	(5,826)		(5,160)
	(121,538)		(122,120)
Deferred tax assets:
Employee benefits	28,989		28,859
Accounts and notes receivable	10,406		6,726
Inventory	3,718		10,272
Federal income tax credits	3,439		1,914
Net operating loss carryforwards	1,015		1,740
Operating lease liability	8,653		9,526
Other	12,324		7,118
Total deferred tax assets	68,544		66,155
less: Valuation allowance	4,416		3,834
	64,128		62,321
Net deferred tax liabilities(a)	$	(57,410)	$	(59,799)

(a) The Company had deferred tax assets of $1.2 million and $4.3 million included in Other assets in the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

On December 31, 2023, the Company had $50.6 million and $1.6 million of state and non-U.S. net operating loss carryforwards that begin to expire in 2028 and 2024, respectively. The Company also has $3.4 million of U.S. foreign tax credits ("FTCs") carryforwards that begin to expire in 2028. The valuation allowance of $4.4 million is related to deferred tax assets of $3.4 million, $0.6 million, and $0.4 million for U.S. federal FTCs, branch income tax accounting that will impact future U.S. federal FTCs, and outside basis differences in U.S. equity investees, respectively.

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance will be recorded to reduce deferred tax assets if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. In assessing the realizability of our deferred tax assets, we consider positive and negative evidence, including historical operating results, future reversals of existing taxable temporary differences, projected future earnings, and tax planning strategies.

The Company and its subsidiaries file income tax returns in the U.S., foreign, state and local jurisdictions. The Company is no longer subject to examination by taxing authorities in the U.S., foreign, or state and local jurisdictions for years before 2015. The Company and its subsidiary partnership returns are under federal tax examination by the IRS for tax years ranging from 2015 through 2021. The Company’s subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. Due to the potential for resolution of U.S. federal, foreign, state and local examinations, it is reasonably possible that the gross unrecognized tax benefits may change within the next twelve months by a range of $2.9 million to $7.6 million.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(in thousands)	2023		2022		2021
Balance at beginning of period	$	79,262	$	51,754	$	44,401
Tax positions related to the current year
Gross additions	—		8,074		13,179
Tax positions related to prior years
Gross additions	6,134		19,434		1,364
Gross reductions	(58)		—		(7,190)
Lapse in statute of limitations	(619)		—		—
Balance at end of period	$	84,719	$	79,262	$	51,754

As of December 31, 2023, 2022 and 2021, if our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. As of December 31, 2023, unrecognized tax benefits of $84.7 million include $64.0 million associated with the federal and state research & development credits.

The Company’s practice is to recognize interest and penalties on uncertain tax positions in the Income tax provision from continuing operations within the Consolidated Statements of Operations. At December 31, 2023, 2022, and 2021, the Company recorded reserves of $13.0 million, $8.6 million and $2.7 million, respectively, of interest and penalties on uncertain tax positions in Other long-term liabilities within the Consolidated Balance Sheets.