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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s consolidated financial statements include U.S. federal, state and local income taxes on the Company’s allocable share of the U.S. results of operations, as well as taxes payable to jurisdictions outside the U.S. In addition, certain of the Company’s entities are taxed as U.S. partnerships and are subject to the UBT in New York City. Therefore, the tax liability or benefit related to the partnership income or loss, except for UBT, rests with the partners (see Note 2—“Limited Partnership Interests in BGC Holdings and Newmark Holdings” for discussion of partnership interests), rather than the partnership entity.
The provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
202120202019
Current:
U.S. federal$(7,267)$239 $(4,142)
U.S. state and local4,940 6,828 3,928 
Foreign36,699 30,788 52,943 
UBT588 (3)1,278 
34,960 37,852 54,007 
Deferred:
U.S. federal(1,000)(11,050)(11,565)
U.S. state and local(1,515)(5,848)8,537 
Foreign(12,098)3,602 506 
UBT2,666 (3,253)(1,674)
(11,947)(16,549)(4,196)
Provision for income taxes$23,013 $21,303 $49,811 
The Company had pre-tax income (loss) of $176.5 million, $72.2 million and $116.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company had pre-tax income (loss) from domestic operations of $(642.4) million, $(212.0) million and $(206.7) million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company had pre-tax income (loss) from foreign operations of $818.9 million, $284.2 million and $323.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Differences between the Company’s actual income tax expense and the amount calculated utilizing the U.S. federal statutory rates were as follows (in thousands):
Year Ended December 31,
202120202019
Tax expense at federal statutory rate$37,065 $15,166 $24,492 
Non-controlling interest2,440 73 3,466 
Incremental impact of foreign taxes compared to federal tax rate
5,009 (476)7,935 
Other permanent differences11,797 6,531 4,538 
U.S. state and local taxes, net of U.S. federal benefit2,737 (321)(2,650)
New York City UBT2,929 (3,256)(392)
Other rate changes(7,007)(12,783)10,509 
Nontaxable gain on insurance disposition(65,231)— — 
Uncertain tax positions(6,936)1,475 (1,025)
U.S. tax on foreign earnings, net of tax credits31,299 2,643 3,166 
Return-to-provision adjustments(714)1,076 (3,937)
Valuation allowance11,532 11,966 4,015 
Other(1,907)(791)(306)
Provision for income taxes$23,013 $21,303 $49,811 

As of December 31, 2021, the Company’s intention is to permanently reinvest undistributed foreign pre-tax earnings in the Company’s foreign operations. While the one-time transition tax eliminated most of the income tax effects of repatriating the undistributed earnings, there could still be foreign and state and local tax effects on the distribution. Accordingly, no provision has been recorded on foreign and state and local taxes that would be applicable upon distribution of such earnings to the U.S. Further, determination of an estimate of deferred tax liability associated with the distribution of foreign earnings is not practicable. However, this policy will be further re-evaluated and assessed based on the Company’s overall business needs and requirements.
The Company has finalized its accounting policy with respect to taxes on Global Intangible Low-Taxed Income (GILTI) and has elected to treat taxes associated with the GILTI provision using the Period Cost Method and thus have not recorded deferred taxes for basis differences under this regime as of December 31, 2021. Accordingly, the Company recorded a tax expense of $33.7 million, net of foreign tax credits, for the impact of the GILTI provision on its foreign subsidiaries.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against deferred tax assets if it is deemed more likely than not that those assets will not be realized.
Significant components of the Company’s deferred tax asset and liability consisted of the following (in thousands):
Year Ended December 31,
20212020
Deferred tax asset
Basis difference of investments$15,906 $15,644 
Deferred compensation70,635 74,030 
Excess interest expense31,319 26,238 
Other deferred and accrued expenses12,157 8,835 
Net operating loss and credit carry-forwards60,160 84,822 
Total deferred tax asset1
190,177 209,569 
Valuation allowance(48,623)(81,191)
Deferred tax asset, net of valuation allowance141,554 128,378 
Deferred tax liability
Depreciation and amortization24,331 27,406 
Total deferred tax liability1
24,331 27,406 
Net deferred tax asset$117,223 $100,972 
_______________________________________
1Before netting within tax jurisdictions.
The Company has deferred tax assets associated with net operating losses in U.S. federal, state and local, and non-U.S. jurisdictions of $1.4 million, $5.9 million and $45.8 million, respectively. These losses will begin to expire in 2027, 2025 and 2022, respectively. The Company has deferred tax assets associated with tax credits in the U.S. of $7.2 million, which will begin to expire in 2027. The Company’s decrease in net operating losses as well as associated valuation allowance is primarily due to disposition of the Insurance brokerage business that occurred during the year. The Company’s deferred tax asset and liability are included in the Company’s consolidated statements of financial condition as components of “Other assets” and “Accounts payable, accrued and other liabilities,” respectively.
Pursuant to U.S. GAAP guidance, Accounting for Uncertainty in Income Taxes, the Company provides for uncertain tax positions as a component of income tax expense based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.
A reconciliation of the beginning to the ending amounts of gross unrecognized tax benefits for the years ended December 31, 2021, 2020 is as follows (in thousands):
Balance, December 31, 2019$10,481 
Increases for prior year tax positions1,706 
Decreases for prior year tax positions— 
Increases for current year tax positions— 
Decreases related to settlements with taxing authorities— 
Decreases related to a lapse of applicable statute of limitations
— 
Balance, December 31, 2020$12,187 
Increases for prior year tax positions884 
Decreases for prior year tax positions(999)
Increases for current year tax positions— 
Decreases related to settlements with taxing authorities— 
Decreases related to a lapse of applicable statute of limitations
(7,678)
Balance, December 31, 2021$4,394 
As of December 31, 2021, the Company’s unrecognized tax benefits, excluding related interest and penalties, were $4.4 million, of which $4.4 million, if recognized, would affect the effective tax rate. The Company is currently open to examination by tax authorities in U.S. federal, state and local jurisdictions and certain non-U.S. jurisdictions for tax years beginning 2017, 2009 and 2016, respectively. The Company is currently under examination by tax authorities in the U.S. federal and certain state, local and foreign jurisdictions. The Company does not believe that the amounts of unrecognized tax benefits will materially change over the next 12 months.
The Company recognizes interest and penalties related to unrecognized tax benefits in “Provision (benefit) for income taxes” in the Company’s consolidated statements of operations. As of December 31, 2021, the Company had accrued $2.5 million for income tax-related interest and penalties of which $(0.7) million was accrued during 2021.