Income Taxes Level 1 (Notes)

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The provision or benefit for income taxes includes U.S. federal income taxes (determined on a consolidated return basis), foreign income taxes, and state income taxes.

We actively participate in tax credit equity investments for projects eligible to receive renewable energy credits. These investments, accounted for under the equity method, are recorded in Deferred charges and other assets, net of reserves on our Consolidated Balance Sheet. Upon realization, tax credits associated with these investments are recognized as a reduction of tax expense. This reduction is offset by amortization of the investment in proportion to the tax benefits received during the period under the proportional amortization method. During 2023, we recognized investment tax credits totaling $11.6 million and amortized the equity investment by $11.5 million to reflect the realization of these benefits. This amortization is reflected within the Provision for income taxes in the Consolidated Statement of Operations.

Income before income taxes was composed of the following components:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
United States	$	664,745	$	703,131	$	994,632
Foreign	43,861		52,497		50,868
Total income before income taxes	$	708,606	$	755,628	$	1,045,500

Income tax provision consisted of the following:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Current:
United States	$	(30,832)	$	139,132	$	194,545
Foreign	14,989		14,486		14,088
State	(4,728)		32,505		39,452
Total current income taxes	(20,571)		186,123		248,085
Deferred:
United States	$	155,677	$	(59)	$	(3,543)
Foreign	(1,999)		780		(5,492)
State	37,838		2,750		3,198
Total deferred income taxes	191,516		3,471		(5,837)
Total income taxes	$	170,945	$	189,594	$	242,248

We made income tax payments of $85.5 million, $183.7 million, and $270.2 million in 2023, 2022, and 2021, respectively, and received refunds of $1.7 million, $4.2 million, and $4.7 million, respectively.

The differences between the U.S. federal statutory income tax rate and our effective tax rate were as follows:

	Years Ended December 31,
	2023			2022			2021
	(In thousands)
Computed tax provision at the applicable federal statutory income tax rate	$	148,807		$	158,682		$	219,555
State and local taxes, net of federal income tax benefits	27,041			28,817			35,045
Foreign jurisdiction differences	3,756			3,976			3,041
Permanent differences associated with divestitures	47			200			400
Changes in uncertain tax positions and audit settlements	110			53			51
Foreign valuation allowance, net of federal income tax benefits	—			—			(4,155)
Excess tax benefit from share-based compensation	(8,406)			(8,918)			(12,476)
Other	(410)			6,784			787
Provision for income taxes	$	170,945		$	189,594		$	242,248
Total consolidated effective tax rate	24.1		%	25.1		%	23.2		%

The 2023 consolidated effective tax rate was 24.1%, compared to 25.1% in 2022. The lower effective tax rate in 2023 was primarily due to non-taxable gains on the cash surrender value of certain life insurance policies.

Deferred taxes are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

	Years Ended December 31,
	2023		2022
	(In thousands)
Inventories and cemetery property	$	(196,887)	$	(201,795)
Deferred incremental direct selling costs	(104,686)		(99,377)
Property and equipment	(177,411)		(181,029)
Intangibles	(207,727)		(204,010)
Deferred revenue on preneed funeral and cemetery contracts	(80,178)		—
Other	(5,746)		(5,313)
Deferred tax liabilities	(772,635)		(691,524)
Loss and tax credit carryforwards	127,796		137,785
Deferred revenue on preneed funeral and cemetery contracts	—		153,479
Accrued liabilities	122,887		80,069
Deferred tax assets	250,683		371,333
Less: valuation allowance	(108,834)		(118,939)
Net deferred income tax liability	$	(630,786)	$	(439,130)

Deferred tax assets and deferred income tax liabilities are recognized in our Consolidated Balance Sheet as follows:

	Years Ended December 31,
	2023		2022
	(In thousands)
Non-current deferred tax assets - included in Deferred charges and other assets, net	$	7,320	$	5,910
Non-current deferred tax liabilities - included in Deferred tax liability	(638,106)		(445,040)
Net deferred income tax liability	$	(630,786)	$	(439,130)

As of December 31, 2023, foreign withholding taxes have not been provided on the estimated $247.6 million of undistributed earnings and profits (E&P) of our foreign subsidiaries as we intend to permanently reinvest these foreign E&P in the respective businesses outside the U.S. However, if we were to repatriate such foreign E&P, the foreign withholding tax liability is estimated to be $12.8 million. Additionally, if we were to repatriate E&P in excess of our previously taxed income under the Tax Cuts and Jobs Act of 2017, such excess repatriation may cause us to incur an additional U.S. federal income tax of approximately $7.7 million related to our hybrid debt structure between Canada and the United States that was eliminated in 2022.

The following table summarizes the activity related to our gross unrecognized tax benefits from January 1, 2021 to December 31, 2023 (in thousands):

	Federal, State, and Foreign Tax
	(In thousands)
Balance at December 31, 2020	$	1,348
Reduction to tax positions related to prior years	—
Balance at December 31, 2021	$	1,348
Reductions to tax positions related to prior years	—
Balance at December 31, 2022	$	1,348
Reductions to tax positions related to prior years	—
Balance at December 31, 2023	$	1,348

Our total unrecognized tax benefits that, if recognized, would affect our effective tax rates were $1.3 million as of December 31, 2023, 2022 and 2021.

We include potential accrued interest and penalties related to unrecognized tax benefits within our income tax provision account. We have accrued $1.0 million, $0.9 million, and $0.8 million for the payment of interest, net of tax benefits, and

penalties as of December 31, 2023, 2022 and 2021, respectively. We recorded an increase of interest and penalties of $0.1 million for each of the years ended December 31, 2023, 2022 and 2021, respectively. To the extent interest and penalties are not assessed with respect to uncertain tax positions or the uncertainty of deductions in the future, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

We file income tax returns, including tax returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. We consider the United States to be our most significant jurisdiction; however, all tax returns are subject to routine compliance review by the taxing authorities in the jurisdictions in which we file tax returns in the ordinary course of business.

The federal statutes of limitations have expired for all tax years prior to 2020, 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.

Various subsidiaries have federal, state, and foreign loss carryforwards in the aggregate of $2.5 billion with expiration dates through 2041. Such loss carryforwards will expire as follows:

	Federal		State		Foreign		Total
	(In thousands)
2024	$	—	$	160,355	$	346	$	160,701
2025	—		321,190		471		321,661
2026	—		368,207		957		369,164
2027	—		189,465		1,798		191,263
Thereafter	—		1,423,484		3,824		1,427,308
Total loss carryforwards	$	—	$	2,462,701	$	7,396	$	2,470,097

In addition to the above loss carryforwards, we have $2.2 million of foreign alternative minimum tax credits that can be carried forward indefinitely.

In assessing the usefulness of deferred tax assets, we consider whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The future realization of net deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. During 2023, we recorded a net $10.1 million decrease in our valuation allowance primarily driven by utilization and expiration of state net operating losses, along with legislative changes in certain states. The valuation allowances can be affected in future periods by changes to tax laws, changes to statutory tax rates, and changes in estimates of future taxable income.

At December 31, 2023, our loss and tax credit carryforward deferred tax assets and related valuation allowances by jurisdiction are as follows (presented net of federal benefit).

	Federal		State		Foreign		Total
			(In thousands)
Loss and tax credit carryforwards	$	—	$	122,796	$	5,000	$	127,796
Valuation allowance	$	—	$	94,135	$	14,699	$	108,834