v2.4.0.8

INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
INCOME TAXES | 14. INCOME TAXES The Provision for Income Taxes consists of the following:
|  | Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal Income Tax |  | $ | 19,237 |  |  | $ | 5,928 |  |  | $ | 4,509 |
Foreign Income Tax |  |  | 13,302 |  |  |  | 16,921 |  |  |  | 22,741 |
State and Local Income Tax |  |  | 33,273 |  |  |  | 36,022 |  |  |  | 8,997 |
|  |  | 65,812 |  |  |  | 58,871 |  |  |  | 36,247 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal Income Tax |  |  | 157,962 |  |  |  | 100,875 |  |  |  | 226,153 |
Foreign Income Tax |  |  | (638 | ) |  |  | (691 | ) |  |  | 403 |
State and Local Income Tax |  |  | 32,506 |  |  |  | 25,968 |  |  |  | 82,908 |
|  |  | 189,830 |  |  |  | 126,152 |  |  |  | 309,464 |
Provision for Taxes |  | $ | 255,642 |  |  | $ | 185,023 |  |  | $ | 345,711 |
The following table summarizes Blackstone’s tax position:
|  | Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Income Before Provision for Taxes |  | $ | 3,148,561 |  |  | $ | 1,014,905 |  |  | $ | 77,258 |
Total Provision for Taxes |  | $ | 255,642 |  |  | $ | 185,023 |  |  | $ | 345,711 |
Effective Income Tax Rate |  |  | 8.1 | % |  |  | 18.2 | % |  |  | 447.5 | %
The following table reconciles the Provision for Taxes to the U.S. federal statutory tax rate:
|  | Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Statutory U.S. Federal Income Tax Rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Income Passed Through to Common Unitholders and Non-Controlling Interest Holders (a) |  |  | -28.7 | % |  |  | -23.6 | % |  |  | 76.9 | %
Interest Expense |  |  | -0.9 | % |  |  | -3.4 | % |  |  | -47.0 | %
Foreign Income Taxes |  |  | -0.2 | % |  |  | -3.2 | % |  |  | 10.5 | %
State and Local Income Taxes |  |  | 1.7 | % |  |  | 3.0 | % |  |  | 38.7 | %
Equity-Based Compensation |  |  | 1.6 | % |  |  | 9.3 | % |  |  | 132.4 | %
Change in Tax Rate |  |  | 0.6 | % |  |  | -0.1 | % |  |  | 202.9 | %
Net Unrecognized Tax Positions |  |  | -0.2 | % |  |  | 0.7 | % |  |  | 7.8 | %
Non Deductible Expenses |  |  | 0.0 | % |  |  | 0.6 | % |  |  | 2.5 | %
Tax Deductible Compensation |  |  | -0.3 | % |  |  | -0.4 | % |  |  | -10.2 | %
Other |  |  | -0.5 | % |  |  | 0.3 | % |  |  | -2.0 | %
Effective Income Tax Rate (b) |  |  | 8.1 | % |  |  | 18.2 | % |  |  | 447.5 | %
(a) | Includes income that is not taxable to the Partnership and its subsidiaries. Such income is directly taxable to the Partnership’s unitholders and the non-controlling interest holders.
(b) | The effective tax rate is calculated on Income (Loss) Before Provision for Taxes.
In 2013, a subsidiary of the Partnership received Letter Rulings allowing the application of New York State and New York City laws that prescribe the sourcing of income of a registered securities or commodities broker resulting in a reduction to the rate of tax for 2013 and the rate of tax that Blackstone will pay in the future. In 2011, application of the New York State and New York City tax laws that source various types of receipts from services performed by registered brokers and dealers of securities and commodities for purposes of apportioning income resulted in a reduction to Blackstone’s rate of tax for that year and to the rate of tax that Blackstone will pay in subsequent years. The reduction in the rate of tax resulted in a reduction in the 2013 and 2011 current tax provision and an increase in the 2013 and 2011 deferred tax provision with a corresponding reduction to the net Deferred Tax Assets of $22.7 million and $233.7 million, respectively, with the net result an increase to the effective income tax rate as reflected in the table above. Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. A summary of the tax effects of the temporary differences is as follows:
|  | December 31, |
|  | 2013 |  |  | 2012 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Fund Management Fees |  | $ | 8,728 |  |  | $ | 16,719 |
Equity-Based Compensation |  |  | 54,810 |  |  |  | 45,329 |
Unrealized Gains from Investments |  |  | (117,685 | ) |  |  | (58,499 | )
Depreciation and Amortization |  |  | 1,285,042 |  |  |  | 1,257,145 |
Net Operating Loss Carry Forward |  |  | 12 |  |  |  | 18,780 |
Other |  |  | (21,700 | ) |  |  | 6,137 |
Total Deferred Tax Assets |  | $ | 1,209,207 |  |  | $ | 1,285,611 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Depreciation and Amortization |  | $ | 10 |  |  | $ | 143 |
Total Deferred Tax Liabilities |  | $ | 10 |  |  | $ | 143 |
Future realization of tax benefits depends on the expectation of taxable income within a period of time that the tax benefits will reverse. The Partnership has recorded a significant deferred tax asset for the future amortization of tax basis intangibles acquired from the predecessor owners and current owners. The amortization period for these tax basis intangibles is 15 years; accordingly, the related deferred tax assets will reverse over the same period. The Partnership had a taxable loss of $56.8 million and $81.4 million for the years ended December 31, 2011 and 2010, respectively, of which $8.8 million was carried back and utilized against prior year taxable income, $74.9 million was utilized against taxable income generated in the tax year ended December 31, 2012 and $54.6 million will be utilized against taxable income generated in the tax year ended December 31, 2013. The Partnership has considered the 15 year amortization period for the tax basis intangibles and the 20 year carryforward period for its taxable loss in evaluating whether it should establish a valuation allowance. The Partnership also considers projections of taxable income in evaluating its ability to utilize deferred tax assets. In projecting its taxable income, the Partnership begins with historic results and incorporates assumptions of the amount of future pretax operating income. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that the Partnership uses to manage its business. At this time, the Partnership’s projections of future taxable income that include the effects of originating and reversing temporary differences, including those for the tax basis intangibles, indicate that it is more likely than not that the benefits from the deferred tax asset will be realized. Therefore, the Partnership has determined that no valuation allowance is needed at December 31, 2013. Currently, the Partnership does not believe it meets the indefinite reversal criteria that would cause the Partnership to not recognize a deferred tax liability with respect to its foreign subsidiaries. Where applicable, Blackstone will record a deferred tax liability for any outside basis difference of an investment in a foreign subsidiary. Blackstone files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, Blackstone is subject to examination by federal and certain state, local and foreign tax regulators. As of December 31, 2013, Blackstone’s U.S. federal income tax returns for the years 2010 through 2012 are open under the normal three-year statute of limitations and therefore subject to examination. The Internal Revenue Service is examining certain corporate subsidiaries’ 2007 through 2011 U.S. federal income tax returns. State and local tax returns are generally subject to audit from 2009 through 2012. Currently, the State of New York is examining the tax returns filed by Blackstone and certain of its subsidiaries for the years 2010 through 2011 and the City of New York is examining certain other subsidiaries’ tax returns for the years 2007 through 2009. The Income Tax Department of the Government of India is examining the tax returns of the Indian subsidiaries for the years 2008 and 2009. Blackstone believes that during 2014 certain tax audits have a reasonable possibility of being completed and does not expect the results of these audits to have a material impact on the consolidated financial statements. Blackstone’s unrecognized tax benefits, excluding related interest and penalties, were:
|  | December 31, |
|  | 2013 |  |  | 2012 |
Unrecognized Tax Benefits—January 1 |  | $ | 30,742 |  |  | $ | 12,234 |
Additions based on Tax Positions Related to Current Year |  |  | 6,517 |  |  |  | 6,117 |
Additions for Tax Positions of Prior Years |  |  | 3,435 |  |  |  | 16,733 |
Reductions for Tax Positions of Prior Years |  |  | (17,686 | ) |  |  | (3,215 | )
Settlements |  |  | (3,538 | ) |  |  | (1,596 | )
Exchange Rate Fluctuations |  |  | (608 | ) |  |  | 469 |
Unrecognized Tax Benefits—December 31 |  | $ | 18,862 |  |  | $ | 30,742 |
If the above tax benefits were recognized, $18.9 million and $26.8 million for the years ended December 31, 2013 and 2012, respectively would reduce the annual effective rate. Blackstone does not believe that it will have a material increase or decrease in its unrecognized tax benefits during the coming year. The unrecognized tax benefits are recorded in Accounts Payable, Accrued Expense and Other Liabilities in the Consolidated Statements of Financial Condition. Blackstone recognizes interest and penalties accrued related to unrecognized tax positions in General, Administrative and Other Expense. During the year ended December 31, 2013, $1.0 million of interest expense and no penalties were accrued. During the year ended December 31, 2012, $5.8 million of interest expense and $0.5 million of penalties were accrued. During the year ended December 31, 2011, $1.5 million of interest expense and no penalties were accrued. On September 13, 2013, the U.S. Treasury Department and the IRS issued final regulations that address costs incurred in acquiring, producing, or improving tangible property (“the tangible property regulations”). The tangible property regulations are generally effective for tax years beginning on or after January 1, 2014, and may be adopted in earlier years. Management does not anticipate the impact of these changes to be material to the Partnership’s consolidated financial condition or results of operations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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