Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate from continuing operations for the three months ended September 30, 2023 was an expense of 18.6%, which differs from the U.S. statutory rate of 21.0% primarily due to state income taxes, foreign income taxes, non-deductible executive compensation, excess tax benefits associated with equity-based compensation, taxes not recorded on our non-controlling interests in partially-owned subsidiaries, and the remeasurement of deferred tax liabilities due to state tax law changes and rate reductions enacted during the third quarter.

The effective tax rate from continuing operations for the nine months ended September 30, 2023 was an expense of 2.8%, 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 and state tax law changes and rate reductions enacted during the year; changes in our valuation allowances; state income taxes; and foreign income taxes.

During the nine months ended September 30, 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 nine months ended September 30, 2023. As a result, we recorded an $11.9 million income tax benefit in our Consolidated Statements of Operations during the nine months ended September 30, 2023.

Pursuant to the acquisition of RSI during the nine months ended September 30, 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 period, which was recorded through deferred income tax expense.

The tax provision for the nine months ended September 30, 2023 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 rates from continuing operations for the three and nine months ended September 30, 2022 were expenses of 22.5% and 23.7%, respectively, which differ from the U.S. statutory rate of 21.0% primarily due to state income taxes, foreign income taxes, non-deductible executive compensation, excess tax benefits associated with equity-based compensation, taxes not recorded on our non-controlling interests in partially-owned subsidiaries, and a reduction of our uncertain tax positions balance due to a lapse of a state statute of limitations.

The total income tax receivable position as of September 30, 2023 was $7.9 million primarily for state and foreign tax overpayments. Our income tax payable for federal and state taxes is $10.5 million as of September 30, 2023. During the third quarter, we recorded an uncertain tax position and a corresponding deferred tax asset for a prior year federal tax return item, which resulted in an immaterial impact to income tax expense during the three and nine months ended September 30, 2023.

Our federal tax return years through 2021 are effectively settled. 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 2018 forward. We believe we are appropriately reserved for any potential matters.