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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 23. Income Taxes Income before Income Tax Expense—Domestic and Foreign The U.S. and foreign components of income before income tax expense for the years ended December 31, 2019, 2018 and 2017 are as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
U.S . (1) |  | $ | 6,774 |  |  | $ | 43,677 |  |  | $ | 72,371 |
Foreign (1) |  |  | (6,653 | ) |  |  | 7,362 |  |  |  | (14,179 | )
Total |  | $ | 121 |  |  | $ | 51,039 |  |  | $ | 58,192 |
(1) | Represents the pre-tax results of the Company’s U.S. and foreign subsidiaries, not the results of the U.S. and International Business segments which are separately disclosed in Note 27. The segment results are prepared based upon the way management reviews performance.
Income Tax Expense/(Benefit)—By Jurisdiction The components of current and deferred income tax expense included in the Consolidated Statement of Operations for years ended December 31, 2019, 2018 and 2017 as determined in accordance with ASC 740, Income Taxes , are as follows:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,311 |  |  | $ | 15,805 |  |  | $ | 19,007 |
State and local |  |  | 2,271 |  |  |  | 3,202 |  |  |  | 2,708 |
Foreign |  |  | (1,687 | ) |  |  | 1,482 |  |  |  | 440 |
|  | $ | 10,895 |  |  | $ | 20,489 |  |  | $ | 22,155 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (246 | ) |  | $ | (5,318 | ) |  | $ | 7,947 |
State and local |  |  | (54 | ) |  |  | (1,077 | ) |  |  | 1,105 |
Foreign |  |  | (49 | ) |  |  | 312 |  |  |  | (214 | )
|  | $ | (349 | ) |  | $ | (6,083 | ) |  | $ | 8,838 |
Income tax expense |  | $ | 10,546 |  |  | $ | 14,406 |  |  | $ | 30,993 |
Reconciliation of Statutory Federal Income Tax Rate to the Effective Income Tax Rate A reconciliation of the statutory federal income tax expense and the Company’s to tal income tax expense is as follows:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Federal income tax expense |  | $ | 25 |  |  | $ | 10,718 |  |  | $ | 20,367 |
Change in valuation allowance—Capital losses (1) |  |  | 7,555 |  |  |  | 794 |  |  |  | — |
Change in valuation allowance—Foreign |  |  | 4,737 |  |  |  | 3,510 |  |  |  | 5,355 |
Decrease in unrecognized tax benefits |  |  | (3,894 | ) |  |  | — |  |  |  | — |
Foreign operations |  |  | (3,561 | ) |  |  | (1,041 | ) |  |  | (165 | )
Loss/(gain) on revaluation of deferred consideration (2) |  |  | 2,378 |  |  |  | (2,570 | ) |  |  | — |
Non-deductible executive compensation |  |  | 1,608 |  |  |  | 4 |  |  |  | — |
Stock-based compensation tax (windfalls)/shortfalls |  |  | 1,198 |  |  |  | (543 | ) |  |  | 1,035 |
Blended state income tax rate, net of federal benefit |  |  | 237 |  |  |  | 1,406 |  |  |  | 2,234 |
Non-deductible acquisition and disposition-related costs |  |  | — |  |  |  | 1,506 |  |  |  | 1,549 |
Other differences, net |  |  | 263 |  |  |  | 622 |  |  |  | 618 |
Income tax expense |  | $ | 10,546 |  |  | $ | 14,406 |  |  | $ | 30,993 |
(1) | The capital loss valuation allowance for the year ended December 31, 2019 is principally arising from the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 8).
(2) | The loss/ ( gain ) on revaluation is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary that is based in Jersey, a jurisdiction where the Company is subject to a zero percent tax rate.
Income Tax Payments A summary of income taxes paid by jurisdiction for the years ended December 31, 2019, 2018 & 2017 is as follows:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Federal |  | $ | 6,990 |  |  | $ | 10,710 |  |  | $ | 28,561 |
State and local |  |  | 1,818 |  |  |  | 2,498 |  |  |  | 4,366 |
Foreign |  |  | 1,252 |  |  |  | 1,190 |  |  |  | 186 |
|  | $ | 10,060 |  |  | $ | 14,398 |  |  | $ | 33,113 |
Deferred Tax Assets (“DTAs”) A summary of the components of the Company’s deferred tax assets at December 31, 2019 and 2018 is as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
NOLs—International |  | $ | 9,336 |  |  | $ | 6,605 |
Capital losses |  |  | 8,226 |  |  |  | 794 |
Operating lease liabilities |  |  | 5,529 |  |  |  | 5,519 |
Accrued expenses |  |  | 4,054 |  |  |  | 2,699 |
Stock-based compensation |  |  | 1,754 |  |  |  | 2,673 |
Goodwill and intangible assets |  |  | 1,671 |  |  |  | 1,841 |
NOLs—U.S. |  |  | 642 |  |  |  | 762 |
Outside basis differences |  |  | 123 |  |  |  | — |
Other |  |  | 218 |  |  |  | 40 |
Deferred tax assets |  |  | 31,553 |  |  |  | 20,933 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right of use assets—operating leases |  |  | 4,400 |  |  |  | 4,335 |
Fixed assets and prepaid assets |  |  | 1,326 |  |  |  | 1,433 |
Unrealized gains |  |  | 744 |  |  |  | 724 |
Deferred tax liabilities |  |  | 6,470 |  |  |  | 6,492 |
Total deferred tax assets less deferred tax liabilities |  |  | 25,083 |  |  |  | 14,441 |
Less: valuation allowance |  |  | (17,685 | ) |  |  | (7,399 | )
Deferred tax assets, net |  | $ | 7,398 |  |  | $ | 7,042 |
Net Operating Losses and Capital Losses—U.S. The Company’s tax effected net operating losses (“NOLs”) at December 31, 2019 were $642, which expire in 2024. The net operating loss carryforwards have been reduced by the impact of annual limitations described in the Internal Revenue Code Section 382 that arose as a result of an ownership change. The Company’s tax effected capital losses at December 31, 2019 and December 31, 2018 were $ 8,226 and $794, respectively. The change in capital losses is principally arising from the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 8 ). Net Operating Losses—International Certain of the Company’s European subsidiaries and its Canadian subsidiary generated NOLs outside the U.S. These tax effected NOLs were $9,336 and $6,605 at December 31, 2019 and 2018, respectively. Approximately $4,930 of these NOLs at December 31, 2019 expire between the years 2036 and 2039. The remainder is carried forward indefinitely. Valuation Allowance The Company’s valuation allowance has been established on its net capital losses, international net operating losses and outside basis differences as it is more-likely than not that these deferred tax assets will not be realized. Uncertain Tax Positions Tax positions are evaluated utilizing a two-step process. The Company first determines whether any of its tax positions are more- likely-than-not to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. In connection with the ETFS Acquisition, the Company accrued a liability of £22,118 ($31,317) for uncertain tax positions and £5,065 ($7,171) for interest and penalties at the acquisition date. The table below sets forth the aggregate changes in the balance of gross unrecognized tax benefits:
|  | Total |  |  | Unrecognized Tax Benefits |  |  | Interest and Penalties |
Balance on January 1, 2018 |  | $ | — |  |  | $ | — |  |  | $ | — |
Accrued in connection with the ETFS Acquisition |  |  | 38,488 |  |  |  | 31,317 |  |  |  | 7,171 |
Increases |  |  | 346 |  |  |  | — |  |  |  | 346 |
Foreign currency translation (1) |  |  | (3,958 | ) |  |  | (3,216 | ) |  |  | (742 | )
Balance at December 31, 2018 |  | $ | 34,876 |  |  | $ | 28,101 |  |  | $ | 6,775 |
Decrease—Lapse of statute of limitations |  |  | (4,309 | ) |  |  | (2,999 | ) |  |  | (1,310 | )
Increases |  |  | 416 |  |  |  | — |  |  |  | 416 |
Foreign currency translation (1) |  |  | 1,118 |  |  |  | 896 |  |  |  | 222 |
Balance at December 31, 2019 |  | $ | 32,101 |  |  | $ | 25,998 |  |  | $ | 6,103 |
(1) | The gross unrecognized tax benefits were accrued in British pounds.
The Company also recorded an offsetting indemnification asset provided by ETFS Capital as part of its agreement to indemnify the Company for any potential claims, for which an amount is being held in escrow. ETFS Capital has also agreed to provide additional collateral by maintaining a minimum working capital balance up to a stipulated amount. The decrease resulting from the lapsing of the statute of limitations of $4,309, was recorded as an income tax benefit and an equal and offsetting amount to reduce the indemnification asset was recorded in other losses, net, during the year ended December 31, 2019. The gross unrecognized tax benefits and interest and penalties totaling $32,101 and $34,876 at December 31, 2019 and December 31, 2018, respectively, are included in other non-current liabilities on the Consolidated Balance Sheet. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $4,028 (including interest and penalties of $ 1,231 ) in the next 12 months upon la p sing of the statu te of limitations . At December 31, 2019 and 2018, there were $32,101 and $34,876, respectively, of unrecognized tax benefits (including interest and penalties) that, if recognized, would impact the effective tax rate. The recognition of any unrecognized tax benefits would result in an equal and offsetting adjustment to the indemnification asset which would be recorded in income before taxes due to the indemnity for any potential claims. Income Tax Examinations The Company is subject to U.S. federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions. The Company’s federal tax return and ManJer’s tax return (a Jersey-based subsidiary) for the year ended December 31, 2016 and the Company’s New York state tax returns for the years ended December 31, 2015 through 2018 are currently under review by the relevant tax authorities. The Company is indemnified by ETFS Capital for any potential exposure associated with ManJer’s tax return under audit. The Company is not currently under audit in any other income tax jurisdictions. As of December 31, 2019, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2015. Undistributed Earnings of Foreign Subsidiaries Due to the imposition of the GILTI provisions, all unremitted earnings are no longer subject to U.S. federal income tax; however, there could be U.S. state and/or foreign withholding taxes upon distribution of such unremitted earnings. The Company recognizes deferred tax liabilities for withholding taxes that may become payable, where applicable, upon the distribution of earnings and profits from foreign subsidiaries unless considered permanent in duration. As of December 31, 2019, the Company considers all undistributed foreign earnings and profits to be permanent in duration.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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