Income Taxes

9 Months Ended

Sep. 30, 2021

INCOME TAXES

A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes	3.3	%	2.9	%	3.1	%	3.0	%
Excess tax benefits from stock-based compensation plans	—	%	—	%	-0.1	%	-0.8	%
Other	0.4	%	0.1	%	0.1	%	0.4	%
Effective income tax rate	24.7	%	24.0	%	24.1	%	23.6	%

State income taxes

State income taxes include non-deductible expenses related to uncertain tax positions. The impact of these non-deductible expenses on our effective income tax rate for the three months ended September 30, 2021 increased from the same period in 2020 primarily due to an increase in the proportion of pre-tax income reserved for uncertain tax positions.

Excess tax benefits from stock-based compensation plans

During the first quarter of each year, we receive a tax benefit upon the vesting of restricted stock and the conversion of restricted stock units to common stock based on the fair value of the shares. The amount by which this tax benefit exceeds the grant-date fair value that was recognized as stock-based compensation expense is referred to as an excess tax benefit. Excess tax benefits are recognized in provision for income taxes and reduce our effective income tax rate. The impact of excess tax benefits on our effective income tax rate decreased from 2020 to 2021 due to an increase in pre-tax income and a decrease in the number of restricted stock units that were converted to common stock during the first quarter of 2021 due to the timing of long-term stock award grants.

Other

Other items impacting our effective income tax rate primarily consist of non-deductible executive compensation expenses. The impact of other items on our effective income tax rate for the three months ended September 30, 2021 increased from the same period in 2020 primarily due to an increase in non-deductible executive compensation, which was primarily the result of stock options granted under our Amended and Restated Incentive Compensation Plan, which was approved by shareholders in July 2021. The impact of other items on our effective income tax rate for the nine months ended September 30, 2021 decreased from the same period in 2020 primarily due to the increase in pre-tax income.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details