Knight-Swift Transportation Holdings Inc
For the period ended Dec 31, 2024. Filed Feb 20, 2025.
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FY2024 · Filed Feb 20, 2025
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Income Taxes
Note 11 —Income Taxes
The following table presents the Company's income tax expense:
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| (In thousands) | |||
| Current expense: | |||
| Federal | $34,201 | $15,726 | $174,277 |
| State | 6,275 | 16,423 | 39,687 |
| Foreign | 11,799 | 12,135 | 4,277 |
| 52,275 | 44,284 | 218,241 | |
| Deferred expense (benefit): | |||
| Federal | (13,448) | 17,353 | 25,850 |
| State | (6,612) | (2,397) | 1,432 |
| Foreign | 745 | (4,472) | 3,865 |
| (19,315) | 10,484 | 31,147 | |
| Income tax expense | $32,960 | $54,768 | $249,388 |
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 2024, 2023, and 2022. Actual tax expense differs from expected tax expense as follows:
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| (In thousands) | |||
| Computed "expected" tax expense | $31,300 | $56,761 | $214,306 |
| Increase (decrease) in income taxes resulting from: | |||
| State income taxes, net of federal income tax benefit | (1,654) | 10,578 | 32,786 |
| Addition/(release) of valuation allowance | 628 | (14,604) | — |
| Nondeductible per-diem paid to drivers | 2,954 | 2,406 | — |
| Effect of rates different than statutory | 3,156 | 1,721 | 2,217 |
| Mark-to-market adjustment | (7,690) | — | — |
| Other, net | 4,266 | (2,094) | 79 |
| Income tax expense | $32,960 | $54,768 | $249,388 |
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, | ||
|---|---|---|
| 2024 | 2023 | |
| (In thousands) | ||
| Deferred tax assets: | ||
| Accrued liabilities | $16,340 | $12,282 |
| Allowance for doubtful accounts | 16,354 | 16,733 |
| Bonus accrual | 2,136 | 2,331 |
| Claims accrual | 136,779 | 127,850 |
| Capital loss carryforward | 2,839 | 6,518 |
| Deferred revenue | 4,596 | 5,358 |
| Interest expense limitation carryforwards | 34,197 | 18,530 |
| Lease reserve | 5,807 | 7,900 |
| Net operating loss and credit carryforwards | 46,246 | 54,173 |
| Stock amortization | 8,884 | 8,947 |
| Operating Lease liabilities | 92,678 | 120,782 |
| Research and development | 13,645 | 7,717 |
| Vacation accrual | 5,788 | 6,430 |
| Other | 896 | 3,979 |
| Total deferred tax assets | 387,185 | 399,530 |
| Valuation allowance | (11,063) | (10,435) |
| Total deferred tax assets, net | 376,122 | 389,095 |
| Deferred tax liabilities: | ||
| Intangible assets | (426,185) | (430,948) |
| Investments | (4,918) | (316) |
| Property and equipment, principally due to differences in depreciation | (748,950) | (766,053) |
| Prepaid taxes, licenses, and permits deducted for tax purposes | (18,784) | (19,936) |
| Operating lease right-of-use assets | (91,172) | (118,152) |
| Foreign accruals | (4,250) | (3,760) |
| Unrecognized tax benefit | (1,677) | (1,677) |
| Other | — | (2) |
| Total deferred tax liabilities | (1,295,936) | (1,340,844) |
| Deferred income taxes | $(919,814) | $(951,749) |
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. The Company has a valuation allowance of $11.1 million and $10.4 million at December 31, 2024 and December 31, 2023, respectively, to offset the tax benefit of capital loss and certain state operating loss carryforwards. In 2024, $3.0 million of the valuation allowance was reversed primarily due to the utilization and expiration of the Company's capital loss carryforward. In addition, $3.6 million in valuation allowance was established to offset the tax benefit of certain separate company state operating loss carryforwards.
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| (In thousands) | |||
| Valuation allowance at beginning of year | $10,435 | $— | $— |
| Additions charged to provision for income taxes | 3,616 | 35 | — |
| Charges to other accounts | — | 25,039 | — |
| Reductions, deferred tax assets realized or written-off | (2,988) | (14,639) | — |
| Valuation allowance at end of year | $11,063 | $10,435 | $— |
Cumulative Undistributed Foreign Earnings — As of December 31, 2024, foreign withholding taxes have not been provided on approximately $168.3 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, 2024 would favorably impact the Company's effective tax rate if subsequently recognized. Management does not expect a decrease in unrecognized tax benefits during the next twelve months.
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 2024, 2023, and 2022 is below:
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| (In thousands) | |||
| Unrecognized tax benefits at beginning of year | $1,677 | $1,735 | $1,735 |
| 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) | — |
| Unrecognized tax benefits at end of year | $1,677 | $1,677 | $1,735 |
Interest and Penalties — There wereno accrued interest and penalties as of December 31, 2024 and December 31, 2023.
Tax Examinations — Certain of the Company's subsidiaries are currently under examination by federal and state jurisdictions for tax years ranging from 2009 to 2022. 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 2019 remain subject to examination.
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