Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate from continuing operations for the three months ended March 31, 2024 was an expense of 25.8%, which differs from the U.S. statutory rate of 21.0% primarily due to state income taxes and foreign income taxes, partially offset by the benefit of noncontrolling interest, for which we do not provide income taxes.

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 a subsidiary; changes in our valuation allowances; state income taxes; and foreign 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 a subsidiary 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 period, which was recorded through deferred income tax expense.

The tax provision for the three months ended March 31, 2023 also reflects a $4.0 million tax benefit related to the net impact of an adjustment to valuation allowances, primarily for deferred tax assets in Mexico, state tax loss carryforwards, and federal tax credits.

The total income tax receivable position as of March 31, 2024 was $4.9 million primarily for state tax overpayments. Our income tax payable for federal, state, and foreign income taxes is $11.6 million as of March 31, 2024.

Deferred income taxes related to railcars in our lease fleet were $1.1 billion as of both March 31, 2024 and December 31, 2023.

Our federal tax return years through 2020 are closed under statute and the years 2021-2023 remain open. 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.

Beginning in 2024, certain jurisdictions have enacted a 15% minimum tax on all companies that operate in their jurisdiction, consistent with one or more Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules ("Pillar Two"). Because the Pillar Two legislation has not been enacted in jurisdictions in which we operate, there is no impact to our effective tax rate; however, we will continue to monitor our potential exposure to Pillar Two in the jurisdictions in which we operate.