Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

During the three months ended March 31, 2023, one of our partially-owned subsidiaries released residual tax effects that had previously been recorded in AOCI. This deferred tax benefit was originally recorded before the partially-owned subsidiary was treated as a flow-through entity, remaining in AOCI until the underlying book to tax difference no longer existed, which occurred during the three months ended March 31, 2023. As a result, we recorded an $11.9 million income tax benefit in our Consolidated Statements of Operations during the three months ended March 31, 2023.

Pursuant to the acquisition of RSI during the three months ended March 31, 2023, we re-measured our existing deferred tax assets and liabilities, taking into account the expected change to state tax apportionment. This resulted in an increase to our net deferred tax liability of $3.2 million in the quarter, which was recorded through deferred income tax expense.

The tax provision also reflects a $4.0 million tax benefit related to an adjustment to valuation allowances, primarily for deferred tax assets in Mexico, state tax loss carryforwards, and federal tax credits.

The effective tax rate from continuing operations for the three months ended March 31, 2023 was a benefit of 217.0% which differs from the U.S. statutory rate of 21.0% primarily due to the release of residual taxes out of AOCI, the re-measurement of our net deferred tax liabilities due to the acquisition of RSI, changes in our valuation allowances, state income taxes, and foreign income taxes.

The effective tax rate from continuing operations for the three months ended March 31, 2022 was an expense of 23.3%, which differs from the U.S. statutory rate of 21.0% primarily due to state income taxes, foreign income taxes, and non-deductible executive compensation, net of the benefits of excess deductions on equity compensation.

The total income tax receivable position as of March 31, 2023 was $10.1 million.

Our tax years through 2020 are effectively settled except with respect to carryback claims related to the 2013 through 2015 tax years, which are currently in review by the Joint Committee on Taxation. We do not expect any significant changes to the carryback claims. We have received a partial acceptance letter for our 2021 federal tax refund and have one open issue. We have state tax returns that are under audit in the normal course of business, and our Mexican subsidiaries' tax returns statutes of limitations remain open for auditing 2017 forward. We believe we are appropriately reserved for any potential matters.