XML 142 R20.htm IDEA: XBRL DOCUMENT v3.24.0.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES.
INCOME TAX PROVISION.

The provision for income taxes consists of:
(in millions)202320222021
Current income taxes
U.S. federal$554.0 $574.7 $745.0 
State and local68.1 115.4 179.3 
Foreign23.9 15.5 28.1 
Deferred income taxes (benefits)8.6 (207.0)(56.3)
Total$654.6 $498.6 $896.1 

Deferred income taxes (benefits) arise from temporary differences between taxable income for financial statement and income tax return purposes. The deferred income taxes (benefits) recognized as part of our provision for income taxes is related to:
(in millions)202320222021
Property and equipment$(43.2)$(64.1)$11.8 
Asset impairments— 4.6 2.0 
Operating lease assets(6.3)24.8 (10.6)
Operating lease liabilities3.8 (24.3)10.6 
Stock-based compensation1.9 (9.0)(8.1)
Accrued compensation(4.1)(0.5)(1.6)
Supplemental savings plan liability(26.4)21.3 (29.3)
Acquisition-related retention liability(14.8)(13.6)— 
Contingent consideration liability15.4 32.4 — 
Acquired investments(19.5)(73.0)— 
Unrealized holding gains recognized in non-operating income43.8 (114.6)(26.1)
Foreign net operating losses(31.5)(11.0)— 
Change in valuation allowance86.4 16.4 — 
Other3.1 3.6 (5.0)
Total net deferred income taxes (benefits)$8.6 $(207.0)$(56.3)

The following table reconciles the statutory federal income tax rate to our effective income tax rate. 
202320222021
Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %
State income taxes for current year, net of federal income tax benefits(1)
2.3 3.4 3.7 
Net income attributable to redeemable non-controlling interests(2)
(0.5)1.3 (0.1)
Net excess tax benefits from stock-based compensation plans activity0.1 (0.4)(2.1)
Valuation allowance3.4 — — 
Other items— 0.3 (0.1)
Effective income tax rate26.3 %25.6 %22.4 %
(1) State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.
(2) Net income attributable to redeemable non-controlling interests represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.
DEFERRED TAX ASSETS (LIABILITIES).

The net deferred tax assets recognized in our consolidated balance sheets in other assets as of December 31 relate to the following: 
(in millions)20232022
Deferred tax assets
Stock-based compensation$94.5 $96.4 
Property and equipment30.6 — 
Operating lease liabilities44.8 48.6 
Accrued compensation13.7 9.6 
Acquired investments40.3 20.8 
Supplemental savings plan195.3 168.9 
Net operating loss carry-forwards42.5 11.0 
Net unrealized holding losses recognized in income— 10.6 
Currency translation adjustment6.6 8.5 
Other9.4 17.3 
Total deferred tax assets477.7 391.7 
Valuation allowance(102.8)(16.4)
Total deferred tax assets, net of valuation allowance374.9 375.3 
Deferred tax liabilities
Acquisition-related retention liability(39.5)(54.3)
Contingent consideration liability(47.8)(32.4)
Property and equipment— (12.6)
Operating lease assets(42.8)(49.1)
Net unrealized holding gains recognized in income(33.2)— 
Other(17.8)(10.8)
Total deferred tax liabilities(181.1)(159.2)
Net deferred tax assets$193.8 $216.1 

We had operating loss carryforwards before tax of $173.4 million and $61.7 million at December 31, 2023 and 2022, respectively. Almost all of the operating loss carryforwards are attributable to the United Kingdom and do not expire. However, the amount of annual profits that can be relieved by losses carried forward is limited to 50%, subject to an annual allowance of GBP 5 million per group. The increase from 2022 is primarily related to operating losses generated by certain subsidiaries based outside the U.S.

We consider the need for valuation allowances against our deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. As of December 31, 2023 and 2022, the valuation allowances total $102.8 million and $16.4 million, respectively. The increase of $86.4 million in the valuation allowances was due to the uncertainty of generating sufficient taxable income in future periods in certain foreign jurisdictions. Any additional or reversal of valuation allowances in future periods will be dependent on the generation of sufficient taxable income. The future change in the valuation allowance could materially increase or decrease our income tax expenses in future periods.

We intend to repatriate earnings of T. Rowe Price foreign subsidiaries to the U.S. in an amount not to exceed these subsidiaries' previously taxed earnings and profits ("PTEP"), which are estimated to be approximately $886 million at December 31, 2023. These earnings as well as our pro rata share of the earnings of foreign corporations in which T. Rowe Price owns 10% or more were subject to the repatriation tax enacted with the U.S. tax reform and are treated as PTEP. As such, we did not record a deferred tax liability with respect to the U.S. federal or foreign withholding taxes as the PTEP should not be taxed in these jurisdictions.
OTHER DISCLOSURES.

Other assets include tax refund receivables of $81.0 million at December 31, 2023, and $71.2 million at December 31, 2022.

Cash outflows from operating activities include net income taxes paid of $632.0 million in 2023, $794.2 million in 2022, and $948.9 million in 2021.

In 2023, stock-based compensation plans activity increased income tax expense by $3.4 million. In 2022 and 2021, stock-based compensation plans activity decreased income tax expense by $7.1 million and $82.7 million, respectively. These income tax impacts were recognized in the income tax provision.

UNRECOGNIZED TAX BENEFITS.

The following table summarizes the changes in our unrecognized tax benefits. 
(in millions)202320222021
Balance at beginning of year$35.4 $29.3 $26.7 
Changes in tax positions related to
Current year7.8 5.5 8.9 
Prior years0.5 1.3 (1.0)
Expired statute of limitations(1.0)(0.7)(5.3)
Balance at end of year$42.7 $35.4 $29.3 

If recognized, these tax benefits would affect our effective tax rate; however, we do not expect that unrecognized tax benefits for tax positions taken with respect to 2023 and prior years will significantly change in 2024. The U.S. has concluded examinations related to federal tax obligations through the year 2021. A net interest payable related to our unrecognized tax benefits of $5.2 million at December 31, 2023, and $2.3 million at December 31, 2022, are recognized in our consolidated balance sheets. Our accounting policy with respect to interest and penalties arising from income tax settlements is to recognize them as part of our provision for income taxes. Interest recognized as part of our provision for income taxes was not material.