Income Taxes Level 1 (Notes)

9 Months Ended

Sep. 30, 2023

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, events such 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 24.5% and 23.7% for the three months ended September 30, 2023 and 2022, respectively. Our effective tax rate was 24.5% and 25.2% for the nine months ended September 30, 2023 and 2022, respectively. The lower effective tax rate for the three months ended September 30, 2022 was primarily due to a change in estimate in the finalization of the 2021 tax return. The lower effective tax rate for the nine months ended September 30, 2023 was primarily due to non-taxable gains on the cash surrender value of certain life insurance policies. The effective tax rate for the three and nine months ended September 30, 2023 was higher than the federal statutory tax rate of 21.0% primarily due to state tax expense.

Unrecognized Tax Benefits

As of September 30, 2023, the total amount of our unrecognized tax benefits was $1.3 million and the total amount of our accrued interest was approximately $1.0 million.

The federal statutes of limitation have expired for all tax years prior to 2019, 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 2021. There are currently no federal or provincial audits in Canada; however, years subsequent to 2017 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