Unrecognized tax benefits and related interest and penalties, all of which would affect our effective tax rate if recognized

[T](#ic6799676e16f4a73b9fbe61f891b870d_7)[able of Contents](#ic6799676e16f4a73b9fbe61f891b870d_7)In addition to the above financing agreements we have a $15 million discretionary line of credit with U.S. Bank of which $7.9 million is currently utilized for standby letters of credit related to insurance collateral as of December 31, 2021. These standby letters of credit are renewed annually and were undrawn as of December 31, 2021.NOTE 5: INCOME TAXESC.H. Robinson Worldwide, Inc., and its 80 percent (or more) owned U.S. subsidiaries file a consolidated federal income tax return. We file unitary or separate state returns based on state filing requirements. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2014. We are currently under an Internal Revenue Service audit for the 2015-2017 tax years.In 2019, we removed our assertion that the unremitted earnings of our foreign subsidiaries were permanently reinvested with limited exceptions. If we repatriated all foreign earnings that are still considered to be permanently reinvested, the estimated effect on income taxes payable would be an increase of approximately $2.0 million as of December 31, 2021. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic. The CARES Act allows for a deferral of the employer share of federal payroll taxes otherwise due through December 31, 2020. Under the act, 50 percent of the deferred amount was due December 31, 2021, and the remaining 50 percent is due December 31, 2022. This provision allows us to defer certain federal payroll deposits and invest this cash back into the business without any interest cost. The CARES Act also provides for a tax credit of up to $5,000 related to wages and health benefits provided to an employee whose work from March 17, 2020, through December 31, 2020, was impacted by COVID-19. Through December 31, 2021, we have recognized a payroll deferral and tax credit of $14.7 million and $0.7 million, respectively, under the CARES Act. On December 28, 2021, the Treasury Department released final regulations on determining the foreign tax credit, and allocating and apportioning deductions, under the Internal Revenue Code. The impact of this finalized guidance is not expected to have a material impact on our results. Income before provision for income taxes consisted of (in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
| Domestic | $ | 566,847  |  |  | $ | 499,384  |  |  | $ | 649,742  |  |
| Foreign | 455,444  |  |  | 128,947  |  |  | 92,515  |  |
| Total | $ | 1,022,291  |  |  | $ | 628,331  |  |  | $ | 742,257  |  |

  
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
| Unrecognized tax benefits, beginning of period | $ | 36,216  |  |  | $ | 33,938  |  |  | $ | 31,515  |  |
| Additions based on tax positions related to the current year | 3,530  |  |  | 3,172  |  |  | 2,212  |  |
| Additions for tax positions of prior years | 1,919  |  |  | 1,568  |  |  | 2,148  |  |
| Reductions for tax positions of prior years | (2,431) |  |  | (124) |  |  | —  |  |
| Lapse in statute of limitations | (1,932) |  |  | (2,276) |  |  | (1,703) |  |
| Settlements | —  |  |  | (62) |  |  | (234) |  |
| Unrecognized tax benefits, end of the period | $ | 37,302  |  |  | $ | 36,216  |  |  | $ | 33,938  |  |

  
Income tax expense considers amounts that may be needed to cover exposures for open tax years. We do not expect any material impact related to open tax years; however, actual settlements may differ from amounts accrued.As of December 31, 2021, we had $42.9 million of unrecognized tax benefits and related interest and penalties, all of which would affect our effective tax rate if recognized. In the unlikely event these unrecognized tax benefits and related interest and penalties were recognized fully in 2021, the impact to the annual effective tax rate would have been 4.2 percent. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly increase or decrease in the next 12 months. The total liability for unrecognized tax benefits is expected to decrease by approximately $5.9 million in the next 12 months due to lapsing of statutes. 52
