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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

17.

INCOME TAXES

Lazard Ltd, through its subsidiaries, is subject to U.S. federal income taxes on all of its U.S. operating income, as well as on the portion of non-U.S. income attributable to its U.S. subsidiaries. In addition, Lazard Ltd, through its subsidiaries, is subject to state and local taxes on its income apportioned to various state and local jurisdictions. Outside the U.S., Lazard Group operates principally through subsidiary corporations that are subject to local income taxes in foreign jurisdictions. Lazard Group is also subject to Unincorporated Business Tax (“UBT”) attributable to its operations apportioned to New York City.

The components of the Company’s provision for income taxes for the years ended December 31, 2022, 2021 and 2020, and a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rates for such years, are shown below.

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

2,081

 

 

$

(12,772

)

 

$

6,531

 

Foreign

 

 

73,410

 

 

 

100,235

 

 

 

44,381

 

State and local

 

 

6,165

 

 

 

3,197

 

 

 

1,389

 

Total current

 

 

81,656

 

 

 

90,660

 

 

 

52,301

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

31,980

 

 

 

69,633

 

 

 

41,817

 

Foreign

 

 

3,960

 

 

 

6,709

 

 

 

6,946

 

State and local

 

 

6,769

 

 

 

14,301

 

 

 

(1,615

)

Total deferred

 

 

42,709

 

 

 

90,643

 

 

 

47,148

 

Total

 

$

124,365

 

 

$

181,303

 

 

$

99,449

 

 

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

U.S. federal statutory income tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

BEAT and GILTI tax

 

 

-

 

 

 

0.4

 

 

 

0.9

 

Foreign source income not subject to U.S.

   income tax

 

 

(0.4

)

 

 

(2.6

)

 

 

(6.4

)

Change in U.S. federal valuation allowance

 

 

2.0

 

 

 

1.1

 

 

 

0.5

 

Share-based incentive compensation

 

 

0.2

 

 

 

0.1

 

 

 

0.6

 

Foreign taxes

 

 

4.0

 

 

 

6.1

 

 

 

3.2

 

Foreign tax credits

 

 

(3.7

)

 

 

(3.6

)

 

 

(2.1

)

State and local taxes

 

 

2.3

 

 

 

2.6

 

 

 

0.2

 

Loss (income) of non-controlling interests

 

 

(1.4

)

 

 

(0.3

)

 

 

0.1

 

Uncertain tax positions

 

 

(0.1

)

 

 

(0.6

)

 

 

0.7

 

Other

 

 

0.2

 

 

 

0.8

 

 

 

1.1

 

Effective income tax rate

 

 

24.1

%

 

 

25.0

%

 

 

19.8

%

 

See Note 21 regarding “operating income (loss)” by geographic region.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are as follows:

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Deferred Tax Assets:

 

 

 

 

 

 

 

 

Basis adjustments (a)

 

$

131,353

 

 

$

154,987

 

Compensation and benefits

 

 

173,047

 

 

 

192,088

 

Net operating loss and tax credit carryforwards

 

 

227,280

 

 

 

247,854

 

Depreciation and amortization

 

 

1,268

 

 

 

1,138

 

Other

 

 

64,887

 

 

 

50,547

 

Gross deferred tax assets

 

 

597,835

 

 

 

646,614

 

Valuation allowance

 

 

(88,239

)

 

 

(88,953

)

Deferred tax assets (net of valuation allowance)

 

 

509,596

 

 

 

557,661

 

Deferred Tax Liabilities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,309

 

 

 

13,633

 

Compensation and benefits

 

 

23,631

 

 

 

33,790

 

Goodwill

 

 

43,448

 

 

 

39,451

 

Other

 

 

29,471

 

 

 

37,306

 

Deferred tax liabilities

 

 

105,859

 

 

 

124,180

 

Net deferred tax assets

 

$

403,737

 

 

$

433,481

 

 

(a)

The basis adjustments recorded as of December 31, 2022 and 2021 are primarily the result of additional basis from acquisitions of interests, including the impact of the tax receivable agreement obligation.

The historical profitability of each tax-paying entity is an important factor in determining whether to record a valuation allowance and when to release any such allowance. Certain of our tax-paying entities have individually experienced losses on a cumulative three year basis or have tax attributes that may expire unused. In addition, some of our tax-paying entities have recorded a valuation allowance on substantially all of their deferred tax assets due to the combined effect of operating losses in certain subsidiaries of these entities as well as foreign taxes that together substantially offset any U.S. tax liability. Taking into account all available information, we cannot determine that it

is more likely than not that deferred tax assets held by these entities will be realized. Consequently, we have recorded valuation allowances on $88,239 and $88,953 of deferred tax assets held by these entities as of December 31, 2022 and 2021, respectively.

Changes in the deferred tax assets valuation allowance for the years ended December 31, 2022, 2021 and 2020 was as follows:

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Beginning Balance

 

$

88,953

 

 

$

82,210

 

 

$

76,486

 

Charged (credited) to provision for income taxes

 

 

5,220

 

 

 

8,742

 

 

 

4,598

 

Charged (credited) to other comprehensive income and

   other

 

 

(5,934

)

 

 

(1,999

)

 

 

1,126

 

Ending Balance

 

$

88,239

 

 

$

88,953

 

 

$

82,210

 

 

The Company had net operating loss and tax credit carryforwards for which related deferred tax assets of $227,280 were recorded at December 31, 2022 primarily relating to:

 

(i)

indefinite-lived net operating loss carryforwards (subject to various limitations) of approximately $48,000 in Australia, Germany, Hong Kong, Saudi Arabia, Singapore and the U.S.; and

 

(ii)

certain carryforwards of approximately $154,000 in the U.S. Foreign Tax Credits of $5,600 begin expiring in 2024 and is fully offset by a valuation allowance.

With few exceptions, the Company is no longer subject to income tax examination by foreign tax authorities and by U.S. federal, state and local tax authorities for years prior to 2014. While the Company is under examination in various tax jurisdictions with respect to certain open years, the Company does not expect that the result of any final determination related to these examinations will have a material impact on its financial statements. Developments with respect to such examinations are monitored on an ongoing basis and adjustments to tax liabilities are made as appropriate.

A reconciliation of the beginning to the ending amount of gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2022, 2021 and 2020 is as follows:

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Balance, January 1 (excluding interest and penalties

   of $18,579, $18,882 and $18,376, respectively)

 

$

77,617

 

 

$

80,954

 

 

$

86,886

 

Increases in gross unrecognized tax benefits relating

   to tax positions taken during:

 

 

 

 

 

 

 

 

 

 

 

 

Prior years

 

 

341

 

 

 

273

 

 

 

2,454

 

Current year

 

 

19,193

 

 

 

17,829

 

 

 

14,702

 

Decreases in gross unrecognized tax benefits

   relating to:

 

 

 

 

 

 

 

 

 

 

 

 

Tax positions taken during prior years

 

 

(2,052

)

 

 

(5,774

)

 

 

(9,814

)

Settlements with tax authorities

 

 

(43

)

 

 

(134

)

 

 

(904

)

Lapse of the applicable statute of limitations

 

 

(17,355

)

 

 

(15,531

)

 

 

(12,370

)

Balance, December 31 (excluding interest and

   penalties of $17,992, $18,579 and $18,882,

   respectively)

 

$

77,701

 

 

$

77,617

 

 

$

80,954

 

 

 

Additional information with respect to unrecognized tax benefits is as follows:

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Unrecognized tax benefits at the end of the year that,

   if recognized, would favorably affect the effective

   tax rate (includes interest and penalties of $17,992,

   $18,579 and $18,882, respectively)

 

$

80,094

 

 

$

81,046

 

 

$

86,117

 

Unrecognized tax benefits that, if recognized, would not

   affect the effective tax rate

 

$

15,599

 

 

$

15,150

 

 

$

13,719

 

Interest and penalties recognized in current income

   tax expense (after giving effect to the reversal of

   interest and penalties of $6,344, $5,210 and

   $3,757, respectively)

 

$

(587

)

 

$

(303

)

 

$

506

 

 

The Company anticipates that it is reasonably possible that approximately $18,000 of unrecognized tax benefits, including interest and penalties recorded at December 31, 2022, may be recognized within 12 months as a result of the lapse of the statute of limitations in various tax jurisdictions.