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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
19. Income Taxes
The following is a summary of income before income taxes (in thousands):
Years Ended December 31,202320222021
Domestic$92,552 $97,235 $13,531 
Foreign(32,698)(5,418)8,596 
Total income before income taxes$59,854 $91,817 $22,127 
The following is a summary of the provision for income taxes (in thousands):
Years Ended December 31,202320222021
Federal:
Current$1,579 $255 $1,382 
Deferred23,331 10,326 15,022 
Total federal24,910 10,581 16,404 
State:
Current3,565 5,721 (935)
Deferred1,362 (1,691)2,652 
Total state4,927 4,030 1,717 
Foreign:
Current(1,432)1,951 2,663 
Deferred1,862 (3,602)(1,071)
Total foreign430 (1,651)1,592 
Total provision for income taxes$30,267 $12,960 $19,713 
The following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):
Years Ended December 31,202320222021
Federal statutory tax$12,569 21.0 %$19,282 21.0 %$4,647 21.0 %
Non-deductible debt extinguishment costs10,360 17.3 — — — — 
State taxes, net of federal tax benefit5,171 8.6 2,761 3.0 1,912 8.6 
Foreign taxes(3,473)(5.8)(2,695)(2.9)1,912 8.6 
Percentage depletion deduction(1,119)(1.9)(1,062)(1.2)(1,015)(4.6)
Non-controlling interests2,942 4.9 933 1.0 1,613 7.3 
Nondeductible expenses2,699 4.5 3,744 4.1 1,398 6.3 
Company-owned life insurance(466)(0.8)902 1.0 (736)(3.3)
Stock-based compensation(685)(1.2)(330)(0.4)(664)(3.0)
Changes in uncertain tax positions(96)(0.2)(54)(0.1)— — 
Change in valuation allowance, net3,163 5.3 (3,212)(3.5)(518)(2.3)
Assets held for sale— — (14,427)(15.7)10,089 45.6 
Nondeductible goodwill945 1.6 8,212 9.0 — — 
Return to provision adjustments(1,250)(2.1)(1,102)(1.2)1,153 5.2 
Other(493)(0.8)8 — (78)(0.3)
Total$30,267 50.6 %$12,960 14.1 %$19,713 89.1 %
The variance from the statutory tax rate in 2023 is due primarily to the tax expense associated with non-deductible debt extinguishment costs and state and local income taxes.
The following is a summary of the deferred tax assets and liabilities:
(in thousands)December 31, 2023December 31, 2022
Long-term deferred tax assets:
Receivables$1,328 $2,818 
Insurance15,018 12,575 
Deferred compensation10,424 9,432 
Convertible debt - call option amortization11,963 3,832 
Accrued compensation3,811 3,354 
Other accrued liabilities1,218 1,536 
Contract income recognition16,986 16,181 
Lease liabilities16,272 12,572 
Net operating loss carryforwards40,541 41,388 
Valuation allowance(24,569)(19,919)
Other3,587 2,671 
Total long-term deferred tax assets96,579 86,440 
Long-term deferred tax liabilities:
Property and equipment76,067 53,921 
Right of use assets16,041 12,202 
Total long-term deferred tax liabilities92,108 66,123 
Net long-term deferred tax assets$4,471 $20,317 
The following is a summary of the net operating loss carryforwards at December 31, 2023:
(in thousands)ExpirationGross CarryforwardTax Effected Carryforward
Federal net operating loss carryforwardsN/A$67,827 $14,243 
State net operating loss carryforwards2024-2042$187,314 9,458 
Foreign tax loss carryforwards2024-2042$57,625 16,840 
Total net operating loss carryforwards at December 31, 2023$40,541 
The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. The federal and state net operating losses acquired during the Layne acquisition in 2018 are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that it is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized.
The following is a summary of the change in valuation allowance:
(in thousands)December 31, 2023December 31, 2022
Beginning balance$19,919 $26,533 
Additions (deductions), net4,650 (6,614)
Ending balance$24,569 $19,919 
The change in the valuation allowance in 2023 is mainly due to the increase in losses and other net deferred tax assets associated with our foreign operations which we do not believe are more likely than not to be used in future years.
We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding
and local taxes, upon distribution of these earnings. We have $51.6 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2023. It is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely.
Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2017. With few exceptions, as of December 31, 2023, we are no longer subject to state examinations by taxing authorities for years before 2017.
We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2016.
We had approximately $22.6 million and $22.8 million of total gross unrecognized tax benefits as of December 31, 2023 and 2022, respectively. There were approximately $5.5 million of unrecognized tax benefits that would affect the effective tax rate in any future period at both December 31, 2023 and 2022. It is reasonably possible that our unrecognized tax benefit could decrease by approximately $1.5 million in 2024, of which $1.3 million would impact our effective tax rate in 2024. The decrease relates to anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits.
The following is a tabular reconciliation of unrecognized tax benefits (in thousands). The balances in the reconciliation are the gross amounts before considering reductions related to available net operating losses. The balance of unrecognized tax benefits net of available net operating losses is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:
December 31,202320222021
Beginning balance$22,756 $22,724 $23,320 
Gross increases – current period tax positions— — — 
Gross decreases – current period tax positions— — — 
Gross increases – prior period tax positions— — — 
Gross decreases – prior period tax positions77 (426)(9)
Settlements with taxing authorities/lapse of statute of limitations(242)(60)(69)
Reclassification of balances from (to) held for sale— 518 (518)
Ending balance$22,591 $22,756 $22,724