Income Taxes Level 1 (Notes)

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure

Income Taxes

Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitation, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was 26.0% and 25.3% for the three months ended March 31, 2022 and 2021, respectively. The higher effective tax rate for the three months ended March 31, 2022 was primarily due to a decrease in the cash value of certain life insurance policies due to negative returns in the financial markets, which lowered a tax benefit for us in the quarter. The effective tax rate for the three months ended March 31, 2022 was higher than the federal statutory tax rate of 21% primarily due to state and foreign tax expenses.

Unrecognized Tax Benefits

As of March 31, 2022, the total amount of our unrecognized tax benefits was $1.3 million and the total amount of our accrued interest was $0.8 million.

The federal statutes of limitation have expired for all tax years prior to 2018, and we are not currently under audit by the IRS. However, pursuant to the 2017 Tax Cuts and Jobs Act, the statute of limitations on the transition tax for the 2017 tax year does not expire until 2024. Various state jurisdictions are auditing years 2013 through 2020. There are currently no federal or provincial audits in Canada; however, years subsequent to 2016 remain open and could be subject to examination. We believe that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease by $1.3 million within the next twelve months as a result of concluding various state tax matters