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Income Taxes | 12 Months Ended
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Dec. 31, 2022
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) |  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
Federal |  | $ | 77,954 |  |  | $ | 73,351 |  |  | $ | 76,936 |
State |  | 11,842 |  |  | 8,628 |  |  | 11,759 |
Foreign |  | 580 |  |  | 2,970 |  |  | 3,171 |
Total Current |  | 90,376 |  |  | 84,949 |  |  | 91,866 |
Deferred: |  |  |  |  |  |
Federal |  | (1,589) |  |  | 3,457 |  |  | 9,991 |
State |  | (256) |  |  | 1,421 |  |  | 2,365 |
Foreign |  | (16,873) |  |  | 14,155 |  |  | 5,813 |
Total Deferred |  | (18,718) |  |  | 19,033 |  |  | 18,169 |
Total |  | $ | 71,658 |  |  | $ | 103,982 |  |  | $ | 110,035 |
The reconciliation between the statutory income tax rate and the effective tax rate consisted of the following for the years ended December 31:
|  | 2022 |  | 2021 |  | 2020
Expected Federal Statutory Income Tax Rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase/(Decrease): |  |  |  |  |  |
State and Local Income Taxes, net of Federal Benefit |  | 2.9 |  |  | 1.9 |  |  | 2.4 |
Foreign Income Taxes |  | (1.8) |  |  | 3.6 |  |  | 0.8 |
Non-Deductible Executive Compensation |  | 1.2 |  |  | 1.2 |  |  | 0.8 |
Other |  | 0.1 |  |  | (0.1) |  |  | (0.3) |
Effective Tax Rate |  | 23.4 | % |  | 27.6 | % |  | 24.7 | %
The effective tax rate for 2022 decreased to 23.4% as compared to the effective tax rate for 2021 of 27.6% prim arily due to an increase in foreign deferred tax expense in 2021 in connection with the revaluation of net foreign deferred tax liabilities resulting from UK legislation that increases the UK corporate income tax rate from 19% to 25% effective April 1, 2023. 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) |  | 2022 |  | 2021
Deferred Tax Assets |  |  |  |
Tax Net Operating Loss Carryforwards |  | $ | 69,634 |  |  | $ | 71,492 |
Lease Liability |  | 25,630 |  |  | 30,289 |
Compensation and Related |  | 18,267 |  |  | 21,457 |
Other |  | 5,619 |  |  | 1,125 |
Total Deferred Tax Assets |  | 119,150 |  |  | 124,363 |
Valuation Allowance |  | (52,432) |  |  | (59,250) |
Total Deferred Tax Asset, net of Valuation Allowance |  | $ | 66,718 |  |  | $ | 65,113 |
Deferred Tax Liabilities |  |  |  |
Intangible Assets |  | $ | 217,963 |  |  | $ | 232,702 |
Right-of-Use Asset |  | 23,201 |  |  | 27,983 |
Property and Equipment |  | 5,790 |  |  | 3,783 |
Other |  | 174 |  |  | 5,851 |
Total Gross Deferred Tax Liability |  | $ | 247,128 |  |  | $ | 270,319 |
Net Deferred Tax Liability |  | $ | 180,410 |  |  | $ | 205,206 |
Long-Term Deferred Tax Liability, net at December 31, 2022 decreased $24.8 million from December 31, 2021 primarily due to a $7.9 million reduction in the foreign deferred tax liability associated with the impairment of an intangible asset, an increase in foreign deferred tax assets of $6.4 million and a $6.0 million decrease related to foreign exchange rate fluctuations on deferred tax assets and liabilities denominated in a foreign currency. At December 31, 2022, Federated Hermes had deferred tax assets related to state and foreign tax net operating loss carryforwards in certain taxing jurisdictions in the aggregate of $69.6 million. The state net operating losses will expire through 2042, while most foreign net operating losses do not expire. A valuation allowance has been recognized for $43.7 million (or 99.6%) of the deferred tax asset for state tax net operating losses, and for $8.7 million (or 33.9%) 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, 2021, Federated Hermes had deferred tax assets related to state and foreign tax net operating loss carryforwards in certain taxing jurisdictions in the aggregate of $71.5 million. The state net operating losses will expire through 2041, while most foreign net operating losses do not expire. A valuation allowance has been recognized for $49.5 million (or 99%) of the deferred tax asset for state tax net operating losses, and for $9.8 million (or 45%) 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, 2022 and 2021 primarily related to lease liabilities reported pursuant to ASC 842 and 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, 2022 or 2021. Therefore, there were no material changes during 2022, and no reasonable possibility of a significant increase or decrease in unrecognized tax benefits within the next twelve months. Federated Hermes’ U.S. federal tax returns for tax years 2019 to 2022 remain open to examination, while filings in its major state tax jurisdictions from tax years 2018 to 2022 generally remain open to examination.

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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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