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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Taxes |
15. | Income Taxes
The Income Before Provision for Taxes consists of the following:
|  | Year Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Income Before Provision (Benefit) for Taxes |  |  |  |  |  |  |  |  |  |  |  |
U.S. Domestic Income |  | $ | 3,023,588 |  |  | $ | 13,275,132 |  |  | $ | 2,311,734 |
Foreign Income |  |  | 438,201 |  |  |  | 284,264 |  |  |  | 305,786 |
|  | $ | 3,461,789 |  |  | $ | 13,559,396 |  |  | $ | 2,617,520 |
The Provision for Taxes consists of the following:
|  | Year Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal Income Tax |  | $ | 503,075 |  |  | $ | 507,648 |  |  | $ | 163,227 |
Foreign Income Tax |  |  | 75,859 |  |  |  | 55,376 |  |  |  | 38,914 |
State and Local Income Tax |  |  | 255,421 |  |  |  | 156,735 |  |  |  | 66,355 |
|  |  | 834,355 |  |  |  | 719,759 |  |  |  | 268,496 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal Income Tax |  |  | (312,961 | ) |  |  | 373,223 |  |  |  | 86,958 |
Foreign Income Tax |  |  | (3,048 | ) |  |  | (2,654 | ) |  |  | 870 |
State and Local Income Tax |  |  | (45,466 | ) |  |  | 94,073 |  |  |  | (310 | )
|  |  | (361,475 | ) |  |  | 464,642 |  |  |  | 87,518 |
Provision for Taxes |  | $ | 472,880 |  |  | $ | 1,184,401 |  |  | $ | 356,014 |
The following table summarizes Blackstone’s tax position:
|  | Year Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Income Before Provision for Taxes |  | $ | 3,461,789 |  |  | $ | 13,559,396 |  |  | $ | 2,617,520 |
Provision for Taxes |  | $ | 472,880 |  |  | $ | 1,184,401 |  |  | $ | 356,014 |
Effective Income Tax Rate |  |  | 13.7 | % |  |  | 8.7 | % |  |  | 13.6 | %
The following table reconciles the effective income tax rate to the U.S. federal statutory tax rate:
|  |  |  |  |  |  |  | 2022 |  | 2021
|  | Year Ended December 31, |  | vs. |  | vs.
|  | 2022 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Statutory U.S. Federal Income Tax Rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | % |  |  | — |  |  |  | — |
Income Passed Through to Non-Controlling Interest Holders |  |  | -8.1 | % |  |  | -10.2 | % |  |  | -10.1 | % |  |  | 2.1 | % |  |  | -0.1 | %
State and Local Income Taxes |  |  | 6.0 | % |  |  | 2.1 | % |  |  | 2.4 | % |  |  | 3.9 | % |  |  | -0.3 | %
Change to a Taxable Corporation |  |  | — |  |  |  | — |  |  |  | 1.4 | % |  |  | — |  |  |  | -1.4 | %
Change in Valuation Allowance |  |  | — |  |  |  | -4.1 | % |  |  | -2.8 | % |  |  | 4.1 | % |  |  | -1.3 | %
Basis Adjustment (a) |  |  | -4.6 | % |  |  | — |  |  |  | — |  |  |  | -4.6 | % |  |  | — |
Other |  |  | -0.6 | % |  |  | -0.1 | % |  |  | 1.7 | % |  |  | -0.5 | % |  |  | -1.8 | %
Effective Income Tax Rate |  |  | 13.7 | % |  |  | 8.7 | % |  |  | 13.6 | % |  |  | 5.0 | % |  |  | -4.9 | %
(a) | Represents the impact of the out-of-period adjustment made during the year ended December 31, 2022 to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision.
Blackstone’s effective tax rate for the year ended December 31, 2022 was impacted by recent increases in Blackstone’s state tax provisions for the jurisdictions in which it operates and larger benefits recorded in December 31, 2021 for valuation allowance releases. During the year ended December 31, 2022, Blackstone recorded an out-of-period adjustment to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision. The cumulative impact of the correction related to prior years resulted in a decrease of $158.2 million in the Provision for Taxes for the year ended December 31, 2022 and a corresponding increase to Deferred Tax Assets as of December 31, 2022. The impact of the out-of-period adjustment on the effective income tax rate is reflected in the Basis Adjustment row in the effective income tax rate table above. Blackstone concluded the out-of-period adjustment was not material to the current or prior periods. 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,
|  | 2022 |  | 2021
Deferred Tax Assets |  |  |  |  |  |  |  |
Investment Basis Differences/Net Unrealized Gains and Losses |  | $ | 2,031,002 |  |  | $ | 1,572,672 |
Other |  |  | 31,720 |  |  |  | 8,965 |
Total Deferred Tax Assets |  |  | 2,062,722 |  |  |  | 1,581,637 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Investment Basis Differences/Net Unrealized Gains and Losses |  |  | 15,409 |  |  |  | 15,421 |
Other |  |  | 31,498 |  |  |  | 16,439 |
Total Deferred Tax Liabilities |  |  | 46,907 |  |  |  | 31,860 |
Net Deferred Tax Assets |  | $ | 2,015,815 |  |  | $ | 1,549,777 |
The net increase in the deferred tax asset for the year ended December 31, 2022, compared to the year ended December 31, 2021, is primarily due to (a) recognition of additional tax basis in certain assets and recording corresponding deferred tax benefits related to quarterly exchanges of Blackstone Holdings Partnership units for common shares of Blackstone Inc., and (b) an out-of-period adjustment that Blackstone recorded to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision. The adjustment was not material to the current or prior periods and reflects the cumulative impact of the correction, which generated an additional deferred tax asset for the year ended December 31, 2022. Realization of deferred tax assets depends on the expectation and character of future taxable income. In addition, Blackstone has no significant net operating losses carryforward at December 31, 2022. In evaluating the ability to realize deferred tax assets, Blackstone among other things, considers projections of taxable income (including character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that Blackstone uses to manage its business. To the extent any portion of the deferred tax assets are not considered to be more likely than not to be realized, valuation allowances are recorded. Currently, Blackstone does not believe it meets the indefinite reversal criteria that would preclude Blackstone from recognizing a deferred tax liability with respect to its foreign subsidiaries. Therefore, if applicable Blackstone recorded 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 authorities. As of December 31, 2022, the most material jurisdictions where Blackstone entities are under active examination are New York State and City. The following are the major filing jurisdictions and their respective earliest open period subject to examination:
Jurisdiction |  | Year
Federal |  |  | 2019 |
New York City |  |  | 2009 |
New York State |  |  | 2016 |
United Kingdom |  |  | 2011 |
Blackstone’s unrecognized tax benefits, excluding related interest and penalties, were:
|  | December 31,
|  | 2022 |  | 2021 |  | 2020
Unrecognized Tax Benefits — January 1 |  | $ | 47,501 |  |  | $ | 32,933 |  |  | $ | 24,958 |
Additions for Tax Positions of Prior Years |  |  | 106,059 |  |  |  | 14,557 |  |  |  | 7,959 |
Exchange Rate Fluctuations |  |  | 64 |  |  |  | 11 |  |  |  | 16 |
Unrecognized Tax Benefits — December 31 |  | $ | 153,624 |  |  | $ | 47,501 |  |  | $ | 32,933 |
If recognized, the above tax benefits of $153.6 million and $47.5 million for the years ended December 31, 2022 and 2021, respectively, would reduce the annual effective rate. It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur during the twelve months subsequent to December 31, 2022. However, at this time, it is not possible to estimate the expected change to the total Unrecognized Tax Benefits and its impact on Blackstone’s effective tax rate. The unrecognized tax benefits are recorded in Accounts Payable, Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition. During the years ended December 31, 2022, 2021 and 2020, Blackstone accrued no penalties and accrued interest expense related to unrecognized tax benefits of $32.6 million, $1.5 million and $1.3 million, respectively. Other Income — Change in Tax Receivable Agreement Liability In 2022 and 2021, the $22.3 million and $(2.8) million, respectively, Change in Tax Receivable Agreement Liability was primarily attributable to a change in our state tax apportionment.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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