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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Corporation is subject to U.S. federal, state and local income taxes with respect to its taxable income, including its allocable share of any taxable income of TWM LLC, and is taxed at prevailing corporate tax rates. The Company’s actual effective tax rate will be impacted by the Corporation’s ownership share of TWM LLC, which is expected to continue to increase over time as Continuing LLC Owners redeem or exchange their LLC Interests for shares of Class A common stock or Class B common stock, as applicable, or the Corporation purchases LLC Interests from Continuing LLC Owners. The Company’s consolidated effective tax rate will also vary from period to period depending on changes in the mix of earnings, tax legislation and tax rates in various jurisdictions. For the year ended December 31, 2022, total income before the provision for income taxes amounted to $437.1 million, consisting of $414.6 million in the United States and $22.5 million in foreign locations. The provision for income taxes consists of the following:
|  | Year Ended
|  | December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (in thousands)
Current: |  |  |  |  |  |
Federal |  | $ | 7,260 |  |  | $ | 2,025 |  |  | $ | (16,529) |
State and Local |  | 16,243 |  |  | 8,334 |  |  | 5,261 |
Foreign |  | 1,154 |  |  | 1,107 |  |  | 2,153 |
Total current tax expense |  | 24,657 |  |  | 11,466 |  |  | (9,115) |
Deferred: |  |  |  |  |  |
Federal |  | 66,591 |  |  | 49,266 |  |  | 52,845 |
State and local |  | (11,384) |  |  | 40,363 |  |  | 12,572 |
Foreign |  | (2,344) |  |  | (4,220) |  |  | (228) |
Total deferred tax expense |  | 52,863 |  |  | 85,409 |  |  | 65,189 |
Total provision for income taxes |  | $ | 77,520 |  |  | $ | 96,875 |  |  | $ | 56,074 |
A reconciliation of the U.S. federal statutory tax rate to the effective rate is as follows:
|  | Year Ended
|  | December 31,
|  | 2022 |  | 2021 |  | 2020
Statutory U.S. federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal income tax benefit |  | 5.3 |  |  | 3.7 |  |  | 5.0 |
Foreign tax rate differential |  | — |  |  | (0.2) |  |  | 0.2 |
Non-controlling interest |  | (2.1) |  |  | (2.3) |  |  | (3.4) |
Tax Receivable Agreement adjustment |  | (0.7) |  |  | (0.7) |  |  | (0.9) |
Rate change |  | (4.1) |  |  | 6.7 |  |  | (0.2) |
Equity Compensation |  | (2.1) |  |  | (2.5) |  |  | (1.8) |
Other |  | 0.4 |  |  | 0.5 |  |  | 0.5 |
Effective income tax rate |  | 17.7 | % |  | 26.2 | % |  | 20.4 | %
The effective tax rate for the years ended December 31, 2022 and 2021 differed from the U.S. federal statutory rate of 21.0% primarily due to the state and local taxes including the tax impact of state apportionment rates changes on total tax expense as a result of the remeasurement of the Company’s net tax deferred asset, the effect of non-controlling interests and the tax impact of the exercise of equity compensation. The effective tax rate for the year ended December 31, 2020 differed from the U.S. federal statutory rate of 21.0% primarily due to the effect of non-controlling interests and the tax impact of the exercise of equity compensation, partially offset by state, local and foreign taxes. The components of the Company’s net deferred tax asset (liability) are as follows:
|  | December 31,
|  | 2022 |  | 2021
|  | (in thousands)
Deferred tax assets: |  |  |  |
Investment in partnership |  | $ | 566,524 |  |  | $ | 506,586 |
Net operating losses |  | 57,247 |  |  | 55,236 |
Tax Receivable Agreement - Interest |  | 14,918 |  |  | 13,393 |
Employee compensation |  | 43,861 |  |  | 31,507 |
Tax credits |  | 9,985 |  |  | 8,947 |
Other |  | 5,569 |  |  | 9,775 |
Deferred tax assets, gross |  | 698,104 |  |  | 625,444 |
Valuation Allowance |  | — |  |  | (741) |
Total deferred tax assets, net |  | 698,104 |  |  | 624,703 |
Deferred tax liabilities |  |  |  |
Goodwill and Intangibles |  | (29,913) |  |  | (26,744) |
Total deferred tax liabilities |  | (29,913) |  |  | (26,744) |
Total net deferred tax asset (liability) |  | $ | 668,191 |  |  | $ | 597,959 |
The Company expects to obtain an increase in its share of the tax basis of the assets of TWM LLC when LLC Interests are redeemed or exchanged by Continuing LLC Owners and in connection with certain other qualifying transactions. This increase in tax basis may have the effect of reducing the amounts that the Corporation would otherwise pay in the future to various tax authorities. Pursuant to the Tax Receivable Agreement, the Corporation is required to make cash payments to the Continuing LLC Owners equal to 50% of the amount of U.S. federal, state and local income or franchise tax savings, if any, that the Corporation actually realizes (or in some circumstances are deemed to realize) as a result of certain future tax benefits to which the Corporation may become entitled. The Corporation expects to benefit from the remaining 50% of tax benefits, if any, that the Corporation may actually realize. See Note 10 – Tax Receivable Agreement for further details. The tax benefit has been recognized in deferred tax assets on the consolidated statement of financial condition. As of December 31, 2022, the Company had tax effected U.S. federal net operating loss carryforwards for income tax purposes of $43.1 million, state and local net operating loss carryforwards of $9.9 million, and foreign net operating loss carryforwards of $4.2 million. If not utilized, the state and local net operating loss carryforwards will begin to expire in 2035. The U.S. federal net operating loss carryforwards and foreign net operating loss carryforwards can be carried forward indefinitely. The components of the Company’s uncertain tax positions are as follows:
|  | Amount
|  | (in thousands)
Gross unrecognized tax benefits as of January 1, 2022 |  | $ | 7,006 |
Increase in current year tax positions |  | 1,833 |
Increase in prior year tax positions |  | 1,109 |
Decrease in prior year tax positions |  | (1,900) |
Settlements |  | — |
Gross unrecognized tax benefits as of December 31, 2022 |  | $ | 8,048 |
The Company recognizes interest and penalties related to income taxes within the provision for income taxes in the consolidated statements of income. Accrued interest and penalties are included within accounts payable, accrued expenses and other liabilities in the consolidated statements of financial condition. The total amount of interest and penalties payable as of December 31, 2022 was $2.4 million and $0.2 million, respectively. In connection with the Reorganization Transactions, a Refinitiv entity was contributed to the Corporation, pursuant to which the Corporation received 96,933,192 LLC Interests and Refinitiv received 96,933,192 shares of Class B common stock (“Refinitiv Contribution”). As a result of the Refinitiv Contribution, the Company assumed the tax liabilities of the contributed entity. The contributed entity is under audit by the State of New Jersey for the tax years 2012 - 2015 and is appealing a tax assessment from an audit by the State of New Jersey for the tax years 2008 - 2011. As of both December 31, 2022 and 2021, the tax liability related to the Refinitiv Contribution is $2.7 million and is included within accounts payable, accrued expenses and other liabilities on the consolidated statement of financial condition. The Company is indemnified by Refinitiv for these tax liabilities that were assumed by the Company as a result of the Refinitiv Contribution. As of both December 31, 2022 and 2021, $2.7 million is included in other assets on the consolidated statement of financial condition related to this indemnification. The above tax positions were recognized using the best estimate of the amount expected to be paid based on available information and assessment of all relevant factors. Due to the uncertainty associated with tax audits, it is possible that at some future date liabilities resulting from these audits could vary significantly from these positions. Nevertheless, based on currently enacted legislation and information currently known to us, the Company believes that the ultimate resolution of these audits will not have a material adverse impact on the Company’s financial condition taken as a whole. Furthermore, the Company does not anticipate any material changes to net uncertain tax benefits within the next twelve months.

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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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