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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income tax expense is composed of the following: 
Year Ended December 31,
 202220212020
Current:
Federal$26,107 $19,746 $10,825 
State4,438 3,489 1,291 
Foreign(223)294 — 
 30,322 23,529 12,116 
Deferred:
Federal2,870 5,345 (302)
State(1,821)1,405 442 
Foreign(71)— — 
 978 6,750 140 
Total$31,300 $30,279 $12,256 

Income tax expense also included tax expense allocated to comprehensive income for 2022, 2021, and 2020 of $33, $19, and $229, respectively (see the Consolidated Statements of Comprehensive Income).
 
A reconciliation of income tax expense at the normal statutory federal rate to income tax expense included in the accompanying Consolidated Statements of Income is below:
Year Ended December 31,
202220212020
“Expected” provision at federal statutory rate$29,442 $25,435 $11,046 
State income taxes, net6,446 5,713 2,408 
Foreign income taxes(223)294 — 
Change in valuation allowance416 204 (422)
Share-based compensation(34)31 56 
Federal and state tax credits(3,506)(1,363)(1,035)
Other(1,241)(35)203 
Income tax expense$31,300 $30,279 $12,256 
Effective tax rate22.3 %25.0 %23.3 %
 
The tax effects of temporary differences giving rise to deferred income taxes shown on the Consolidated Balance Sheets are as follows:
December 31,
 20222021
Deferred income tax assets:
Share-based compensation$2,462 $1,973 
State tax credit carryforwards3,991 2,343 
Operating loss carryforwards3,040 2,416 
Inventories1,936 1,923 
Operating lease liabilities3,949 2,536 
Deferred compensation691 1,357 
Other3,002 3,362 
Gross deferred income tax assets19,071 15,910 
Less: valuation allowance(2,073)(1,657)
Net deferred income tax assets16,998 14,253 
Deferred income tax liabilities:
Property, plant and equipment(25,623)(24,627)
Intangibles(47,187)(46,956)
Inventory(2,812)(4,307)
Operating lease right-of-use assets(3,850)(2,487)
Convertible Senior Note(2,424)(411)
Other(2,214)(1,566)
Gross deferred income tax liabilities(84,110)(80,354)
Net deferred income tax liability$(67,112)$(66,101)

A schedule of the change in valuation allowance is as follows:
Balance at December 31, 2020
$862 
Increase795 
Balance at December 31, 2021
1,657 
Increase416 
Balance at December 31, 2022
$2,073 

As of December 31, 2022, the Company’s total valuation allowance of $2,073 related to net operating loss in states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods. As of December 31, 2021, the Company’s total valuation allowance of $1,657 related to net operating loss and tax credits carryforwards in states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods.

The Merger with Luxco during 2021 was largely structured as a non-taxable merger for U.S. income tax purposes. This merger required the Company to book an additional $57,034 in deferred tax liabilities to its opening balance sheet. In addition, at December 31, 2021, the Company had book tax differences resulting in a net deferred tax liability balance of $66,101. This increase in the Company’s deferred tax balances could make the Company more susceptible to the tax impact of tax rate changes and its effect on earnings and earnings per share in the future.
As of December 31, 2022 and 2021, the Company had $21,537 and $19,823 in gross state net operating loss carryforwards, respectively. Due to varying state carryforward periods, the state net operating loss carryforwards will primarily expire in varying years between calendar years 2022 and 2042. As of December 31, 2022 and 2021, the Company had gross state tax credit carryforwards of $5,052 and $2,966, respectively. State credits, if not used to offset income tax expense in their respective jurisdictions, will expire in varying years between 2022 and 2039.
The Company treats accrued interest and penalties related to tax liabilities, if any, as a component of income tax expense.  During 2022, 2021, and 2020, the Company’s activity in accrued interest and penalties was not significant.

The following is a reconciliation of the total amount of unrecognized tax benefits (excluding interest and penalties) for 2022, 2021, and 2020:
Year Ended December 31,
 202220212020
Beginning of year balance$113 $112 $255 
Additions based on prior year tax positions75 — 2 
Additions based on current year tax positions2 31 20 
Reduction for prior year tax positions(34)(30)— 
Reductions for settlements— — (165)
End of year balance$156 $113 $112 

For each period presented, substantially all of the amount of unrecognized benefits (excluding interest and penalties) would impact the effective tax rate, if recognized. The Company reasonably expects that the amount of unrecognized tax benefit will not change significantly over the next 12 months.

The Company is not under any federal, state or foreign income tax audits. For federal tax purpose, all tax years after 2018 remain open to adjustment. Amounts paid for income tax in foreign jurisdictions are not material to the financial statements. In addition, the Company is subject to examination for its state tax returns for years 2018, and forward, with the exception of certain net operating losses and credit carryforwards originating in years prior to 2018 that remain subject to adjustment.