Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Before Income Taxes

Polaris’ income before income taxes was generated from its United States and foreign operations as follows (in thousands):

	For the Years Ended December 31,
	2019		2018		2017
United States	$	344,346	$	344,728	$	264,207
Foreign	63,454		84,521		54,584
Income before income taxes	$	407,800	$	429,249	$	318,791

Components of Provision for Income Taxes

Components of Polaris’ provision for income taxes are as follows (in thousands):

	For the Years Ended December 31,
	2019			2018		2017
Current:
Federal	$	46,441		$	39,051	$	41,134
State	18,199			3,759		7,264
Foreign	26,798			27,539		22,267
Deferred	(7,522		)	23,643		75,634
Total provision for income taxes	$	83,916		$	93,992	$	146,299

Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate

Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2019		2018		2017
Federal statutory rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	2.3		1.9		1.4
Domestic manufacturing deduction	(2.1	)	(1.4	)	(0.5	)
Research and development tax credit	(4.0	)	(3.1	)	(5.6	)
Stock based compensation	0.2		(1.4	)	(4.4	)
Valuation allowance	0.5		0.2		1.2
Tax Reform impact	—		0.4		17.4
Non-deductible expenses	—		—		2.0
Foreign tax rate differential	1.7		1.3		(0.3	)
Other permanent differences	1.0		3.0		(0.3	)
Effective income tax rate for continuing operations	20.6	%	21.9	%	45.9	%

Net Deferred Income Taxes

The net deferred income taxes consist of the following (in thousands):

	As of December 31,
	2019			2018
Deferred income taxes:
Inventories	$	18,550		$	11,171
Accrued expenses	126,593			105,218
Cost in excess of net assets of businesses acquired	(35,203		)	(22,916		)
Property and equipment	(88,145		)	(72,252		)
Operating lease assets	(26,480		)	—
Operating lease liabilities	27,115			—
Employee compensation and benefits	61,441			56,286
Net operating loss and other loss carryforwards	20,079			13,847
Valuation allowance	(14,620		)	(10,370		)
Total net deferred income tax asset	$	89,330		$	80,984

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	For the Years Ended December 31,
	2019			2018
Balance at January 1,	$	25,511		$	19,096
Gross increases for tax positions of prior years	1,237			6,586
Gross increases for tax positions of current year	3,969			2,522
Decreases due to settlements and other prior year tax positions	(5,629		)	(2,550		)
Decreases for lapse of statute of limitations	(752		)	—
Currency translation effect on foreign balances	42			(143		)
Balance at December 31,	24,378			25,511
Reserves related to potential interest and penalties at December 31,	3,714			3,090
Unrecognized tax benefits at December 31,	$	28,092		$	28,601