Income taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income taxes

Income taxes. Income tax expense consists of the following:

	2022	2021	2020
	(in $ thousands)
Current income tax expense:
Federal	37,723	57,274	47,778
State	3,051	7,600	3,235
Foreign	9,797	16,508	7,567
	50,571	81,382	58,580
Deferred income tax expense (benefit):
Federal	(4,025)	13,175	(10,429)
State	254	2,197	388
Foreign	4,064	(2,765)	294
	293	12,607	(9,747)
Total income tax expense	50,864	93,989	48,833

The following reconciles income tax expense computed at the federal statutory rate with income tax expense as reported (in $ thousands, except for income tax rates):

	2022		2021		2020
Expected income tax expense at 21% (1)	44,766		87,613		42,785
Nondeductible expenses	4,731		4,090		2,399
Foreign income tax rate differential	2,955		3,549		1,465
State income tax expense - net of Federal impact	2,664		8,201		2,944
Return-to-provision and true-up adjustments	(1,971)		(1,617)		(438)
Valuation allowance	1,569		(4,427)		2,427
Net (benefit) expense for the Canadian branch (2)	(1,199)		(2,130)		(1,478)
Research and development credits	(1,136)		(398)		(1,055)
Other – net	(1,515)		(892)		(216)
Income tax expense	50,864		93,989		48,833
Effective income tax rate (1)	23.9	%	22.5	%	24.0	%

(1) Calculated using income before taxes and after noncontrolling interests.

(2) For U.S. income tax purposes, the Company’s Canadian operation is a branch of Guaranty. As a result, the Canadian net deferred tax liability is offset in the U.S. as a deferred tax asset but not in an equal amount given differing tax rates in Canada and the U.S.

Deferred tax assets and liabilities resulting from the same tax jurisdiction are netted and presented as either an asset or liability on the consolidated balance sheets. Deferred tax assets and liabilities resulting from different tax jurisdictions are not netted. Deferred tax assets and liabilities as of December 31 are detailed below.

	2022	2021
	(in $ thousands)
Deferred tax assets:
Net operating loss (NOL) carryforwards	24,992	22,615
Accrued expenses	22,837	20,922
Federal offset to Canadian deferred tax liability	10,339	7,591
Capitalized research and development costs	5,959	—
Tax credit carryforwards	4,173	2,816
Foreign currency translation adjustments	3,641	707
Net unrealized losses on investments in securities	3,045	361
Capital loss carryforward	1,691	—
Allowance for credit losses	1,642	1,719
Title loss provisions	1,081	1,191
Investments	1,017	1,161
Deferred payroll taxes	—	1,782
Other	680	821
Deferred tax assets – gross	81,097	61,686
Valuation allowance	(6,202)	(2,279)
Deferred tax assets – net	74,895	59,407

	2022	2021
	(in $ thousands)
Deferred tax liabilities:
Amortization – goodwill and other intangibles	(35,807)	(30,307)
Title loss provisions	(21,133)	(18,233)
Other intangible assets from acquisitions	(20,990)	(34,180)
Fixed assets	(11,072)	(10,074)
Net unrealized gains on investments in securities	(4,325)	(7,131)
Investments	(2,423)	(989)
Deferred compensation on life insurance policies	(2,157)	(2,517)
Other	(1,014)	(909)
Deferred tax liabilities - gross	(98,921)	(104,340)
Net deferred income tax liability	(24,026)	(44,933)

At December 31, 2022, the Company's deferred tax assets related to NOL carryforwards are composed of a $19.6 million U.S. federal NOL carryforward from a 2021 acquisition with no expiration, various state NOL carryforwards which will expire in varying amounts from 2023 through 2042, and foreign NOL carryforwards which will expire in varying amounts from 2023 through 2026 or have unlimited carryforward periods. The future utilization of all NOL carryforwards is subject to various limitations. At December 31, 2022, the Company had $1.6 million of foreign tax credit carryforwards that will begin to expire in 2028. The future utilization of these credit carryforwards is subject to various limitations. Foreign jurisdictions where the Company makes tax payments include Canada, Australia, Costa Rica, Italy and the United Kingdom.

The Company's valuation allowance at December 31, 2022 relates primarily to all foreign tax credit carryforwards, all capital loss carryforwards, certain research and development credits acquired in 2021 and certain state and foreign NOL carryforwards which the Company believes are not more-likely-than-not to be utilized prior to expiration.The Company’s income tax returns are routinely subject to examinations by U.S. federal, foreign, and state and local tax authorities. At December 31, 2022, the Company’s 2019 through 2021 U.S. federal income tax returns and 2017 through 2021 Canadian income tax returns remain subject to examination. The Company is subject to routine examinations by state tax jurisdictions and remains subject to examination for 2017 through 2021 tax returns. The Company expects no material adjustments from any ongoing tax return examinations.