Knight-Swift Transportation Holdings Inc

For the period ended Dec 31, 2023. Filed Feb 22, 2024.

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FY2023 · Filed Feb 22, 2024

KNX$62.11+1.1%Stored close · as of Nov 10, 2026

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Income Taxes

Note 13 —Income Taxes

The following table presents the Company's income tax expense:

	2023	2022	2021
(In thousands)
Current expense:
Federal	$15,726	$174,277	$140,258
State	16,423	39,687	42,319
Foreign	12,135	4,277	8,382
	44,284	218,241	190,959
Deferred expense (benefit):
Federal	17,353	25,850	48,874
State	(2,397)	1,432	(10,369)
Foreign	(4,472)	3,865	1,423
	10,484	31,147	39,928
Income tax expense	$54,768	$249,388	$230,887

Rate Reconciliation — Expected tax expense is computed by applying the US federal corporate income tax rate of 21.0% to earnings before income taxes for 2023, 2022, and 2021. Actual tax expense differs from expected tax expense as follows:

	2023	2022	2021
(In thousands)
Computed "expected" tax expense	$56,761	$214,306	$204,673
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income tax benefit	10,578	32,786	23,063
Release of Valuation Allowance	(14,604)	—	—
Other	2,033	2,296	3,151
Income tax expense	$54,768	$249,388	$230,887

Deferred Income Taxes —The components of the net deferred tax asset (liability) included in "Deferred tax liabilities" in the consolidated balance sheets were:

	December 31,
	2023	2022
(In thousands)
Deferred tax assets:
Accrued liabilities	$12,282	$4,112
Allowance for doubtful accounts	$16,733	$6,911
Claims accrual	127,850	85,573
Capital loss carryforward	6,518	—
Deferred revenue	5,358	6,366
Interest expense limitation carryforwards	18,530	—
Lease reserve	7,900	494
Net operating loss and credit carryforwards	54,173	2,357
Stock amortization	8,947	8,840
Operating Lease liabilities	120,782	45,089
Research and development	7,717	5,421
Vacation accrual	6,430	4,410
Unrealized gain/loss on investment	—	11,815
Other	6,310	4,361
Total deferred tax assets	399,530	185,749
Valuation allowance	(10,435)	—
Total deferred tax assets, net	389,095	185,749
Deferred tax liabilities:
Intangible assets	(430,948)	(342,559)
Property and equipment, principally due to differences in depreciation	(766,053)	(677,010)
Prepaid taxes, licenses, and permits deducted for tax purposes	(19,936)	(17,081)
Operating lease right-of-use assets	(118,152)	(45,083)
Foreign accruals	(3,760)	(8,616)
Other	(1,995)	(3,293)
Total deferred tax liabilities	(1,340,844)	(1,093,642)
Deferred income taxes	$(951,749)	$(907,893)

Valuation Allowance — Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. U.S. Xpress Inc. initially had a valuation allowance of $25.0 million not considering Knight-Swift entities. During 2023, $14.6 million of that valuation allowance was released due to the Company’s ability to utilize certain tax attributes in future periods. The remaining $10.4 million is maintained to offset the tax benefit of capital loss and certain state operating loss carryforward.

	2023	2022	2021
(In thousands)
Valuation allowance at beginning of year	$—	$—	$—
Additions charged to provision for income taxes	35	—	—
Charges to other accounts	25,039	—	—
Reductions, deferred tax assets realized or written-off	(14,639)	—	—
Valuation allowance at end of year	$10,435	$—	$—

Cumulative Undistributed Foreign Earnings — As of December 31, 2023, foreign withholding taxes have not been provided on approximately $148.8 million of cumulative undistributed earnings of foreign subsidiaries. The earnings are considered to be permanently reinvested outside the US. As such, the Company is not required to provide withholding taxes on these earnings until they are repatriated in the form of dividends or otherwise.

Unrecognized Tax Benefits — The Company's unrecognized tax benefits as of December 31, 2023 would favorably impact the Company's effective tax rate if subsequently recognized.

See Note 2 for accounting policy related to the Company's income taxes.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2023, 2022, and 2021 is below:

2023 · 2022 · 2021
(In thousands)
Unrecognized tax benefits at beginning of year	$1,735	$1,735		$2,950
Increases for tax positions taken in the current year	1,677	—		—
Decreases for tax positions taken prior to beginning of year	(1,080)	—		—
Lapse of statute of limitations	(655)		(1,215)
Unrecognized tax benefits at end of year	$1,677	$1,735		$1,735

Due to the acquisition of U.S. Xpress Inc., the Company had an increase in unrecognized tax benefits associated with tax credit carryforwards. Decreases for tax positions are related to the conclusion of the IRS’ audit of a subsidiary’s previously filed amended returns and the lapse of statute of limitations. Management does not expect a decrease in unrecognized tax benefits during the next twelve months.

Interest and Penalties — As of December 31, 2023, there wereno accrued interest and penalties. As of December 31, 2022, accrued interest and penalties were $0.2 million.

Tax Examinations — Certain of the Company's subsidiaries are currently under examination by federal and state jurisdictions for tax years ranging from 2009 to 2021. At the completion of these examinations, management does not expect any adjustments that would have a material impact on the Company's effective tax rate. Years subsequent to 2018 remain subject to examination.

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