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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The “Income before income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in thousands)202220212020
Domestic$58,390 $34,435 $(4,371)
International81,990 91,845 72,905 
Total$140,380 $126,280 $68,534 
The “Income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in thousands)CurrentDeferredTotal
2022
Domestic$26,666 $(18,730)$7,936 
International17,641 (1,826)15,815 
Total$44,307 $(20,556)$23,751 
2021
Domestic$5,155 $(2,938)$2,217 
International16,187 (257)15,930 
Total$21,342 $(3,195)$18,147 
2020
Domestic$5,340 $(11,012)$(5,672)
International26,610 (2,394)24,216 
Total$31,950 $(13,406)$18,544 
Deferred tax assets and liabilities as of December 31, 2022 and 2021, were comprised of the following:
(Dollars in thousands)20222021
Deferred tax assets
Accrued employee benefits and compensation$8,678 $10,647 
Net operating loss carryforwards4,433 3,785 
Tax credit carryforwards2,823 13,170 
Reserves and accruals4,716 5,145 
Operating leases4,227 4,191 
Capitalized research and development21,305 16,622 
Other10,205 5,299 
Total deferred tax assets56,387 58,859 
Less deferred tax asset valuation allowance(2,843)(9,775)
Total deferred tax assets, net of valuation allowance53,544 49,084 
Deferred tax liabilities
Depreciation and amortization14,368 32,669 
Postretirement benefit obligations687 2,071 
Unremitted earnings2,551 2,335 
Operating leases4,618 4,422 
Other4,228 4,367 
Total deferred tax liabilities26,452 45,864 
Net deferred tax asset (liability)$27,092 $3,220 
As of December 31, 2022, we had state net operating loss carryforwards totaling $7.1 million in various state taxing jurisdictions, which expire between 2023 and 2042, and approximately $3.6 million of state research credit carryforwards, which will expire between 2023 and 2040. We believe that it is more likely than not that the benefit from certain of the state net operating loss and state R&D credits carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $2.8 million relating to these carryforwards. We currently have approximately $4.7 million of foreign tax credits that begin to expire in 2028.
We had a valuation allowance of $2.8 million as of December 31, 2022 and $9.8 million as of December 31, 2021, against certain of our deferred tax assets, primarily carryforwards expected to expire unused and deferred tax assets that are capital in nature. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable.
Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows:
(Dollars in thousands)202220212020
Tax expense at Federal statutory income tax rate$29,480 $26,519 $14,392 
Impact of foreign operations1,531 2,020 1,193 
Foreign source income, net of tax credits(6,461)(4,944)1,050 
State tax, net of federal6,898 175 (313)
Unrecognized tax benefits1,921 (8,823)5,800 
Equity compensation excess tax deductions(3,025)262 (791)
General business credits(821)(867)(931)
Distribution related foreign taxes1,504 2,516 2,332 
Executive compensation limitation2,859 1,570 900 
Valuation allowance change(6,932)525 (5,375)
Disproportionate tax effect of pension settlement charges— — — 
Other(3,203)(806)287 
Income tax expense (benefit)$23,751 $18,147 $18,544 
Our effective income tax rate for 2022 was 16.9% compared to 14.4% for 2021. The 2022 rate increase was primarily due to the impact of the decrease in the reversals of unrecognized tax positions in China.
We did not make any changes in 2022 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2022 and 2021, we had recorded a deferred tax liability of $2.5 million and $2.3 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we estimate that, if these undistributed earnings are distributed, they may give rise to an estimated $2.1 million of additional tax liabilities. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2022 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate.
Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2022 and 2021, were as follows:
(Dollars in thousands)20222021
Beginning balance as of January 1$6,583 $15,688 
Gross increases - current period tax positions3,402 1,046 
Gross increases - tax positions in prior periods237 1,150 
Gross decreases - tax positions in prior periods(178)(9,151)
Foreign currency exchange(147)(10)
Settlements(1,028)(2,140)
Ending balance as of December 31$8,869 $6,583 
Included in the balance of unrecognized tax benefits as of December 31, 2022 were $7.8 million of tax benefits that, if recognized, would impact the effective tax rate.
We recognized interest accrued related to unrecognized tax benefit as income tax expense. Related to the unrecognized tax benefits noted above, as of December 31, 2022 and 2021, we had accrued potential interest and penalties of approximately $1.1 million.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2018 through 2022 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2018.