Income taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes. Income tax expense consists of the following:

	2023	2022	2021
	(in $ thousands)
Current income tax expense:
Federal	5,638	37,723	57,274
State	62	3,051	7,600
Foreign	16,347	9,797	16,508
	22,047	50,571	81,382
Deferred income tax expense (benefit):
Federal	(1,919)	(4,025)	13,175
State	107	254	2,197
Foreign	(4,972)	4,064	(2,765)
	(6,784)	293	12,607
Total income tax expense	15,263	50,864	93,989

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):

	2023		2022		2021
Expected income tax expense at 21% (1)	9,597		44,766		87,613
Valuation allowance	6,222		1,569		(4,427)
Nondeductible expenses	3,140		4,731		4,090
Foreign income tax rate differential	2,778		2,955		3,549
Return-to-provision and true-up adjustments	(2,745)		(1,971)		(1,617)
Net benefit for the Canadian branch (2)	(2,377)		(1,199)		(2,130)
Research and development credits	(1,096)		(1,136)		(398)
State income tax expense - net of Federal impact	156		2,664		8,201
Other – net	(412)		(1,515)		(892)
Income tax expense	15,263		50,864		93,989
Effective income tax rate (1)	33.4	%	23.9	%	22.5	%

(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.

	2023	2022
	(in $ thousands)
Deferred tax assets:
Net operating loss (NOL) carryforwards	24,375	24,992
Accrued expenses	23,341	23,249
Tax credit carryforwards	11,551	4,173
Capitalized research and development costs	8,404	5,959
Federal offset to Canadian deferred tax liability	7,418	10,339
Foreign currency translation adjustments	2,705	3,641
Net unrealized losses on investments in securities	1,957	3,045
Allowance for credit losses	1,707	1,642
Title loss provisions	1,081	1,081
Investments	532	1,017
Capital loss carryforward	—	1,691
Other	287	268
Deferred tax assets – gross	83,358	81,097
Valuation allowance	(13,362)	(6,202)
Deferred tax assets – net	69,996	74,895

	2023	2022
	(in $ thousands)
Deferred tax liabilities:
Amortization – goodwill and other intangibles	(43,279)	(35,807)
Title loss provisions	(17,667)	(21,133)
Other intangible assets from acquisitions	(15,518)	(20,990)
Fixed assets	(8,828)	(11,072)
Deferred compensation on life insurance policies	(2,628)	(2,157)
Net unrealized gains on investments in securities	(1,898)	(4,325)
Investments	(1,067)	(2,423)
Other	(380)	(1,014)
Deferred tax liabilities - gross	(91,265)	(98,921)
Net deferred income tax liability	(21,269)	(24,026)

At December 31, 2023, the Company's deferred tax assets related to NOL carryforwards are composed of a $17.7 million U.S. federal NOL carryforward from a 2021 acquisition with no expiration, various state NOL carryforwards which will expire in varying amounts from 2024 through 2043, and foreign NOL carryforwards which will expire in varying amounts from 2024 through 2027 or have unlimited carryforward periods. The future utilization of all NOL carryforwards is subject to various limitations. At December 31, 2023, the Company had $8.9 million of foreign tax credit carryforwards that will begin to expire in 2029. 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, Mexico, Puerto Rico and the United Kingdom.

The Company's valuation allowance at December 31, 2023 relates primarily to all foreign tax credit 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, 2023, the Company’s 2020 through 2022 U.S. federal income tax returns and 2018 through 2022 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 2018 through 2022 tax returns. The Company expects no material adjustments from any ongoing tax return examinations.