INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income before income taxes was taxed in the following jurisdictions in each of the years ended December 31:

	2022		2021		2020
	(Dollars in thousands)
Domestic	$	400,889	$	338,304	$	309,236
Foreign	73,250		128,009		97,842
Total	$	474,139	$	466,313	$	407,078

The components of the provision (benefit) for income taxes were as follows:

 

	2022		2021		2020
	(Dollars in thousands)
Current:
Federal	$	99,760	$	963	$	31,104
State	23,915		3,412		4,501
Foreign	41,797		43,280		38,632
Current income tax provision	165,472		47,655		74,237
Deferred:
Federal	(27,681)		59,979		30,813
State	(8,916)		4,984		72
Foreign	4,416		(5,386)		(6,766)
Deferred income tax (benefit) provision	(32,181)		59,577		24,119
	$	133,291	$	107,232	$	98,356

The provision for income taxes varied from income taxes computed at the statutory U.S. federal income tax rate as a result of the following:

	2022			2021			2020
	(Dollars in thousands)
Income taxes computed at the statutory     U.S. federal income tax rate	$	99,569		$	97,926		$	85,486
State income taxes, net of federal tax benefit	12,815			10,496			5,012
Tax liabilities no longer required	(2,142)			(3,784)			(5,110)
Valuation allowance	16,635			6,745			1,323
Tax credit refunds, net	(5,081)			(3,593)			(1,669)
Foreign earnings taxed at other than 21%	5,126			5,907			12,197
Deferred tax rate changes	(1,276)			(3,409)			(717)
European Commission settlement	5,313			—			—
Other	2,332			(3,056)			1,834
	$	133,291		$	107,232		$	98,356
Effective tax rate	28.1		%	23.0		%	24.2		%

Deferred income taxes reflect the net tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Significant components of our deferred tax assets and liabilities at December 31 were as follows:

	2022		2021
	(Dollars in thousands)
Deferred tax assets:
Pension and other postretirement liabilities	$	11,072	$	27,264
Rationalization and other accrued liabilities	42,219		35,678
AMT and other credit carryforwards	3,094		2,278
Net operating loss carryforwards	45,606		49,911
Other intangible assets	1,091		2,307
Foreign currency translation	223		37
Property, plant and equipment	734		680
Inventory and related reserves	28,409		2,586
Long term operating lease liabilities	53,198		60,782
Other	19,494		6,596
Total deferred tax assets	205,140		188,119
Deferred tax liabilities:
Property, plant and equipment	(253,753)		(257,353)
Pension and other postretirement liabilities	(36,150)		(49,681)
Other intangible assets	(175,358)		(178,955)
Operating lease right of use assets	(50,747)		(58,349)
Inventory and related reserves	—		(22,172)
Foreign currency translation	(17,285)		—
Other	(8,600)		(8,470)
Total deferred tax liabilities	(541,893)		(574,980)
Valuation allowance	(41,823)		(26,712)
	$	(378,576)	$	(413,573)

At December 31, 2022, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $10.1 million and long-term deferred tax liabilities of $388.7 million. At December 31, 2021, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $21.7 million and long-term deferred tax liabilities of $435.3 million. Long-term deferred tax assets were classified as other assets, net in our Consolidated Balance Sheets.

The valuation allowance in 2022 includes deferred tax assets of $41.8 million resulting from state and foreign net operating loss carryforwards, or NOLs. The valuation allowance for deferred tax assets increased in 2022 by $15.1 million primarily due to an increase in the valuation allowance related to foreign NOLs.

At December 31, 2022, we had foreign NOLs of approximately $38.6 million that are available to offset future taxable income. Of that amount, approximately $14.4 million will expire from 2023 to 2033. The remaining portion has no expiration date. At December 31, 2022, we had state tax NOLs of approximately $7.0 million that are available to offset future taxable income and that will expire from 2024 to 2041.

We recognize accrued interest and penalties related to unrecognized taxes as additional income tax expense. At December 31, 2022 and 2021, we had $5.2 million and $5.6 million, respectively, accrued for potential interest and penalties.

The total amount of unrecognized tax benefits recorded in other liabilities as of December 31, 2022 and 2021 were $30.0 million and $32.7 million, respectively, excluding associated tax assets and including the federal tax benefit of state taxes, interest and penalties.

Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another jurisdiction. At December 31, 2022 and 2021, we had approximately $18.5 million and $17.6 million, respectively, in assets associated with uncertain tax positions recorded in other assets, net in our Consolidated Balance Sheets.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits included as other liabilities in our Consolidated Balance Sheets was as follows:

	2022		2021
	(Dollars in thousands)
Balance at January 1,	$	28,981	$	32,777
Increase based upon tax positions of current year	—		425
Increase based upon tax positions of a prior year	1,652		1,464
Decrease based upon settlements with taxing authorities	(131)		—
Decrease based upon a lapse in the statute of limitations	(3,781)		(5,685)
Balance at December 31,	$	26,721	$	28,981

The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2022 and 2021 were $14.1 million and $16.2 million, respectively.

Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. We expect the Internal Revenue Service, or IRS, will complete its review of the 2021 tax year with no change to our filed tax return. We have been accepted into the Compliance Assurance Program for the 2022 and 2023 tax years which provides for the review by the IRS of tax matters relating to our tax return prior to filing. We are subject to examination by state and local tax authorities generally for the period mandated by statute, with the exception of states where waivers of the statute of limitations have been executed. The earliest open period for a state audit is 2016. Our foreign subsidiaries are generally not subject to examination by tax authorities for periods before 2008, and we have contractual indemnities with third parties with respect to open periods that predate our ownership of certain foreign subsidiaries. Subsequent periods may be examined by the relevant tax authorities. In the next twelve months, it is reasonably possible that our reserve for unrecognized tax benefits will decrease by approximately $2.2 million primarily related to tax attributes acquired from and expenses related to certain acquisitions, as we anticipate the expiration of the applicable statute of limitations with respect to certain tax matters.

For certain of our foreign subsidiaries where we expect to be indefinitely reinvested, we estimate that the unremitted earnings as of December 31, 2022 are approximately $94.5 million. The amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings is estimated to be approximately $5.3 million.