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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 24. Income Taxes (Loss)/Income before Income Tax Expense – Domestic and Foreign The U.S. and foreign components of (loss)/income before income tax expense for the years ended December 31, 2020, 2019 and 2018 are as follows:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. |  | $ | (5,187 | ) |  | $ | 6,774 |  |  | $ | 43,677 |
Foreign |  |  | (30,035 | ) |  |  | (6,653 | ) |  |  | 7,362 |
Total |  | $ | (35,222 | ) |  | $ | 121 |  |  | $ | 51,039 |
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, 2020, 2019 and 2018 are as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 3,670 |  |  | $ | 10,311 |  |  | $ | 15,805 |
State and local |  |  | 832 |  |  |  | 2,271 |  |  |  | 3,202 |
Foreign |  |  | (1,877 | ) |  |  | (1,687 | ) |  |  | 1,482 |
|  | $ | 2,625 |  |  | $ | 10,895 |  |  | $ | 20,489 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 60 |  |  | $ | (246 | ) |  | $ | (5,318 | )
State and local |  |  | 13 |  |  |  | (54 | ) |  |  | (1,077 | )
Foreign |  |  | (2,265 | ) |  |  | (49 | ) |  |  | 312 |
|  | $ | (2,192 | ) |  | $ | (349 | ) |  | $ | (6,083 | )
Income tax expense |  | $ | 433 |  |  | $ | 10,546 |  |  | $ | 14,406 |
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 total income tax expense is as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. federal statutory income tax |  | $ | (7,397 | ) |  | $ | 25 |  |  | $ | 10,718 |
Loss/(gain) on revaluation of deferred consideration (1) |  |  | 11,929 |  |  |  | 2,378 |  |  |  | (2,570 | )
Decrease in unrecognized tax benefits, net |  |  | (5,661 | ) |  |  | (3,893 | ) |  |  | — |
Change in valuation allowance – Capital losses |  |  | 4,448 |  |  |  | 7,555 |  |  |  | 794 |
Change in valuation allowance – Foreign net operating losses (“NOLs”) and interest carryforwards |  |  | (2,018 | ) |  |  | 3,997 |  |  |  | 3,510 |
Foreign operations |  |  | (3,342 | ) |  |  | (3,561 | ) |  |  | (1,041 | )
Stock-based compensation tax (windfalls)/shortfalls |  |  | 1,485 |  |  |  | 1,198 |  |  |  | (543 | )
Change in tax-related indemnification assets, net |  |  | 1,189 |  |  |  | 740 |  |  |  | — |
Non-taxable gain on sale – Canadian ETF business |  |  | (740 | ) |  |  | — |  |  |  | — |
Non-deductible executive compensation |  |  | 399 |  |  |  | 1,608 |  |  |  | 4 |
Blended state income tax rate, net of federal benefit |  |  | (171 | ) |  |  | 237 |  |  |  | 1,406 |
Non-deductible acquisition and disposition-related costs |  |  | — |  |  |  | — |  |  |  | 1,506 |
Other differences, net |  |  | 312 |  |  |  | 262 |  |  |  | 622 |
Income tax expense |  | $ | 433 |  |  | $ | 10,546 |  |  | $ | 14,406 |
(1) | 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, 2020, 2019 & 2018 is as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Federal |  | $ | 4,470 |  |  | $ | 6,990 |  |  | $ | 10,710 |
State and local |  |  | 1,353 |  |  |  | 1,818 |  |  |  | 2,498 |
Foreign |  |  | 4,308 |  |  |  | 1,252 |  |  |  | 1,190 |
|  |  | $10,131 |  |  |  | $10,060 |  |  |  | $14,398 |
Deferred Tax Assets (“DTAs”) A summary of the components of the Company’s deferred tax assets at December 31, 2020 and 2019 is as follows:
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capital losses |  | $ | 16,596 |  |  | $ | 8,226 |
Operating lease liabilities |  |  | 4,953 |  |  |  | 5,529 |
Accrued expenses |  |  | 3,507 |  |  |  | 4,054 |
Interest carryforwards |  |  | 2,235 |  |  |  | 2,615 |
NOLs – Foreign |  |  | 2,167 |  |  |  | 6,721 |
Stock-based compensation |  |  | 1,922 |  |  |  | 1,754 |
Goodwill and intangible assets |  |  | 1,466 |  |  |  | 1,671 |
NOLs – U.S. |  |  | 510 |  |  |  | 642 |
Outside basis differences |  |  | 122 |  |  |  | 123 |
Other |  |  | 111 |  |  |  | 218 |
Deferred tax assets |  |  | 33,589 |  |  |  | 31,553 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right of use assets – operating leases |  |  | 3,927 |  |  |  | 4,400 |
Fixed assets and prepaid assets |  |  | 1,261 |  |  |  | 1,326 |
Allocated equity component of convertible notes |  |  | 1,022 |  |  |  | — |
Foreign currency translation adjustment |  |  | 293 |  |  |  | — |
Unremitted earnings – International subsidiaries |  |  | 138 |  |  |  | — |
Unrealized gains |  |  | — |  |  |  | 744 |
Deferred tax liabilities |  |  | 6,641 |  |  |  | 6,470 |
Total deferred tax assets less deferred tax liabilities |  |  | 26,948 |  |  |  | 25,083 |
Less: Valuation allowance |  |  | (18,885 | ) |  |  | (17,685 | )
Deferred tax assets, net |  | $ | 8,063 |  |  | $ | 7,398 |
Net Operating and Capital Losses – U.S. The Company’s tax effected net operating losses (“NOLs”) at December 31, 2020 were $510, 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, 2020 and December 31, 2019 were $16,596 and $8,226, respectively. The change in capital losses is due to the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 8) and a capital loss recognized upon sale of the Canadian ETF business. Net Operating Losses and Interest Carryforwards – Foreign Certain of the Company’s European subsidiaries generated NOLs and interest carryforwards outside the U.S. These tax effected NOLs and interest carryforwards were $4,402 and $9,336 at December 31, 2020 and December 31, 2019, respectively. All of these amounts are carried forward indefinitely. The change in foreign NOLs includes a reduction of $4,930 due to the sale of the Company’s Canadian ETF business, which occurred on February 19, 2020 (Note 3). Valuation Allowance During the year ended December 31, 2020, the Company reduced the valuation allowance on its deferred tax assets by $2,615 associated with interest carryforwards in the UK . The Company has determined that it is more likely than not that these interest carryforwards will be utilized as the Company extinguished its term loan on June 16, 2020 and is therefore no longer accumulating non-deductible interest carryforwards in the UK . The Company also generates profits in that jurisdiction and unused amounts are carried forward indefinitely. The Company’s remaining valuation allowance has been established on its 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. Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic which included temporary changes to income and non-income based tax laws including: (i) the elimination of the 80% of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 and 2020; (ii) allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years; (iii) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years beginning January 1, 2019 and 2020; and (iv) other related provisions. The CARES Act did not have a material impact on the Company’s consolidated financial statements. 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 for uncertain tax positions and 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, 2019 |  | $ | 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 |
Decrease - Lapse of statute of limitations |  |  | (5,981 | ) |  |  | (4,620 | ) |  |  | (1,361 | )
Increases |  |  | 320 |  |  |  | — |  |  |  | 320 |
Foreign currency translation (1) |  |  | 576 |  |  |  | 472 |  |  |  | 104 |
Balance at December 31, 2020 |  | $ | 27,016 |  |  | $ | 21,850 |  |  | $ | 5,166 |
(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 decreases resulting from the lapsing of the statute of limitations of $5,981 and $4,309 for the years ended December 31, 2020 and 2019, respectively, were recorded as income tax benefits and equal and offsetting amounts to reduce the indemnification assets were recorded in other gains and losses, net. The gross unrecognized tax benefits and interest and penalties totaling $27,016 and $32,101 at December 31, 2020 and December 31, 2019, respectively, are included in other non-current liabilities on the Consolidated Balance Sheets. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $5,055 (including interest and penalties of $1,539) in the next 12 months upon lapsing of the statute of limitations. At December 31, 2020 there were $27,016 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 is 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, 2020, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2016. Undistributed Earnings of Foreign Subsidiaries ASC 740-30 Income Taxes provides guidance that US companies do not need to recognize tax effects on foreign earnings that are indefinitely reinvested. The Company’s assertion has changed such that earnings of foreign subsidiaries will be repatriated, resulting in the recognition of a deferred tax liability of $138 at December 31, 2020.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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