Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Three Months Ended
	March 31, 2024		March 31, 2023
	(in thousands)
Current	$	8,532	$	5,435
Deferred	(740)		921
Income tax provision	$	7,792	$	6,356

The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate before the provision for income taxes.

The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

	Three Months Ended
	March 31, 2024		March 31, 2023
Federal statutory rate	21.0	%	21.0	%
State income taxes, net of Federal benefit	5.3		4.0
Excess tax benefits related to share-based compensation (Note 12)	(9.4)		(8.8)
Return to provision	(0.2)		(0.3)
Non-deductible executive compensation	1.0		—
Research and development credits	(1.4)		(1.5)
Other	0.3		0.3
Effective tax rate	16.6	%	14.7	%

We have historically earned investment tax credits from the state of Oklahoma’s manufacturing property investment program. We use the flow-through method to account for investment tax credits earned on eligible tangible asset expenditures. Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used. As part of our expansion projects in Oklahoma, we identified a separate, more advantageous Oklahoma credit program (not income tax related) which resulted in us discontinuing our accumulation of credits for Oklahoma’s manufacturing property investment program after the 2022 tax year. As of March 31, 2024, we have investment tax credit carryforwards of approximately $2.3 million. These credits have estimated expirations from the year 2039 through 2043.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual. Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of $0.5 million for the three months ended March 31, 2024.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021 are required to be capitalized and amortized over 5 years. The amortization requirements for tax purposes is a mid-year convention, meaning that the tax amortization is 10% in the year of acquisition, 20% in the following 4 years, and 10% in the final year.

The Company's estimated annual 2024 effective tax rate, excluding discrete events, is approximately 25.6%. We file income tax returns in the U.S., state and foreign income tax return jurisdictions. We are subject to U.S. income tax examinations for tax years 2020 to present, and to non-U.S. income tax examinations for the tax years 2019 to present. In addition, we are subject to state and local income tax examinations for the tax years 2019 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.