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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Federated Hermes files a consolidated federal income tax return. Financial statement tax expense is determined under the liability method.
Income Tax Provision consisted of the following expense/(benefit) components for the years ended December 31: 
(in thousands)202020192018
Current:
Federal$76,936 $67,745 $54,447 
State11,759 10,158 7,359 
Foreign3,171 2,791 (188)
Total Current91,866 80,694 61,618 
Deferred:
Federal9,991 6,395 7,616 
State2,365 1,427 1,750 
Foreign5,813 (370)2,891 
Total Deferred18,169 7,452 12,257 
Total$110,035 $88,146 $73,875 
The reconciliation between the statutory income tax rate and the effective tax rate consisted of the following for the years ended December 31: 
202020192018
Expected Federal Statutory Income Tax Rate21.0 %21.0 %21.0 %
Increase/(Decrease):
State and Local Income Taxes, net of Federal Benefit2.4 2.4 2.4 
Foreign Income Taxes0.8 (0.1)0.1 
Non-Deductible Executive Compensation0.8 0.9 1.1 
Other(0.3)(0.1)0.3 
Effective Tax Rate 24.7 %24.1 %24.9 %
The effective tax rate for 2020 increased to 24.7% as compared to 2019's rate of 24.1% primarily due to an increase in foreign deferred tax expense in connection with the revaluation of net foreign deferred tax liabilities resulting from the UK's decision not to reduce its corporate tax rate from 19% to 17%.
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities consisted of the following at December 31:
(in thousands)20202019
Deferred Tax Assets
Tax Net Operating Loss Carryforwards$74,274 $71,724 
Lease liability30,931 27,889 
Compensation related18,033 15,994 
Other871 699 
Total Deferred Tax Assets124,109 116,306 
Valuation Allowance(61,089)(57,790)
Total Deferred Tax Asset, net of Valuation Allowance$63,020 $58,516 
Deferred Tax Liabilities
Intangible Assets$211,127 $191,595 
Right-of-use asset28,981 25,691 
Property and equipment5,121 5,493 
Other5,728 1,119 
Total Gross Deferred Tax Liability$250,957 $223,898 
Net Deferred Tax Liability$187,937 $165,382 
Long-Term Deferred Tax Liability, net at December 31, 2020 increased $22.6 million from December 31, 2019 primarily due to certain tax amortization deductions being in excess of book amortization and an increase in intangible assets associated with first quarter 2020 acquisitions (see Note (10) for additional information).
At December 31, 2020, Federated Hermes had deferred tax assets related to state and foreign tax net operating loss carryforwards in certain taxing jurisdictions in the aggregate of $74.3 million. The state net operating losses will expire through 2040, while most foreign net operating losses do not expire. A valuation allowance has been recognized for $51.6 million (or 100%) of the deferred tax asset for state tax net operating losses, and for $9.5 million (or 42%) of the deferred tax asset for foreign tax net operating losses. The valuation allowances were recorded due to management's belief that it is more likely than not that Federated Hermes will not realize the full benefit of these net operating losses. For the deferred tax asset, net of valuation allowance related to foreign net operating losses, management believes that it is more likely than not that it will realize the benefit of these net operating losses based on projections of future taxable income for the entities to which these relate.
At December 31, 2019, Federated Hermes had deferred tax assets related to state and foreign tax net operating loss carryforwards in certain taxing jurisdictions in the aggregate of $71.7 million. The state net operating losses will expire through 2039, while most foreign net operating losses do not expire. A valuation allowance has been recognized for $49.4 million (or 100%) of the deferred tax asset for state tax net operating losses, and for $8.4 million (or 38%) of the deferred tax asset for foreign tax net operating losses. The valuation allowances were recorded due to management's belief that it is more likely than not that Federated Hermes will not realize the full benefit of these net operating losses. For the deferred tax asset, net of valuation allowance related to foreign net operating losses, management believes that it is more likely than not that it will realize the benefit of these net operating losses based on projections of future taxable income for the entities to which these relate.
Federated Hermes' remaining deferred tax assets as of December 31, 2020 and 2019 primarily related to compensation-related expenses that have been recognized for book purposes but are not yet deductible for tax purposes. Management believes that it is more likely than not that Federated Hermes will receive the full benefit of these deferred tax assets due to the expectation that Federated Hermes will generate taxable income well in excess of these amounts in the years they become deductible.
Federated Hermes and its subsidiaries file annual income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions, and in certain foreign jurisdictions. Based upon its review of these filings, there were no material unrecognized tax benefits as of December 31, 2020 or 2019. Therefore, there were no material changes during 2020, and no reasonable possibility of a significant increase or decrease in unrecognized tax benefits within the next twelve months.