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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 22. Income Taxes Income/loss before Income Tax Expense – Domestic and Foreign The U.S. and foreign components of income/loss before income tax expense for the years ended December 31, 2021, 2020 and 2019 are as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. |  | $ | 15,986 |  |  | $ | (5,187 | ) |  | $ | 6,774 |
Foreign |  |  | 40,685 |  |  |  | (30,035 | ) |  |  | (6,653 | )
Total |  | $ | 56,671 |  |  | $ | (35,222 | ) |  | $ | 121 |
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, 2021, 2020 and 2019 are as follows:
|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 5,857 |  |  | $ | 3,670 |  |  | $ | 10,311 |
State and local |  |  | 1,538 |  |  |  | 832 |  |  |  | 2,271 |
Foreign |  |  | (837 | ) |  |  | (1,877 | ) |  |  | (1,687 | )
|  | $ | 6,558 |  |  | $ | 2,625 |  |  | $ | 10,895 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (1,217 | ) |  | $ | 60 |  |  | $ | (246 | )
State and local |  |  | (251 | ) |  |  | 13 |  |  |  | (54 | )
Foreign |  |  | 1,784 |  |  |  | (2,265 | ) |  |  | (49 | )
|  | $ | 316 |  |  | $ | (2,192 | ) |  | $ | (349 | )
Income tax expense |  | $ | 6,874 |  |  | $ | 433 |  |  | $ | 10,546 |
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, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. federal statutory income tax |  | $ | 11,901 |  |  | $ | (7,397 | ) |  | $ | 25 |
Decrease in unrecognized tax benefits, net |  |  | (5,014 | ) |  |  | (5,661 | ) |  |  | (3,893 | )
Foreign operations |  |  | (3,211 | ) |  |  | (3,342 | ) |  |  | (3,561 | )
Change in tax-related indemnification assets, net |  |  | 1,053 |  |  |  | 1,189 |  |  |  | 740 |
Non-deductible executive compensation |  |  | 881 |  |  |  | 399 |  |  |  | 1,608 |
Stock-based compensation tax shortfalls |  |  | 647 |  |  |  | 1,485 |  |  |  | 1,198 |
(Gain)/loss on revaluation of deferred consideration(1) |  |  | (424 | ) |  |  | 11,929 |  |  |  | 2,378 |
Blended state income tax rate, net of federal benefit |  |  | 526 |  |  |  | (171 | ) |  |  | 237 |
Change in valuation allowance – Capital losses |  |  | 5 |  |  |  | 4,448 |  |  |  | 7,555 |
Change in valuation allowance – Foreign net operating losses (“NOLs”) and interest carryforwards |  |  | — |  |  |  | (2,018 | ) |  |  | 3,997 |
Non-taxable gain on sale – Canadian ETF business |  |  | — |  |  |  | (740 | ) |  |  | — |
Other differences, net |  |  | 510 |  |  |  | 312 |  |  |  | 262 |
Income tax expense |  | $ | 6,874 |  |  | $ | 433 |  |  | $ | 10,546 |
(1) | The (gain)/loss 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, 2021, 2020 & 2019 is as follows:
|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal |  | $ | 4,258 |  |  | $ | 4,470 |  |  | $ | 6,990 |
State and local |  |  | 1,020 |  |  |  | 1,353 |  |  |  | 1,818 |
Foreign |  |  | 3,178 |  |  |  | 4,308 |  |  |  | 1,252 |
|  | $ | 8,456 |  |  | $ | 10,131 |  |  | $ | 10,060 |
Deferred Tax Assets (“DTAs”) A summary of the components of the Company’s deferred tax assets at December 31, 2021 and 2020 is as follows:
|  | December 31, |
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capital losses |  | $ | 16,601 |  |  | $ | 16,596 |
Accrued expenses |  |  | 4,993 |  |  |  | 3,507 |
NOLs – Foreign |  |  | 1,934 |  |  |  | 2,167 |
Stock-based compensation |  |  | 1,359 |  |  |  | 1,922 |
Goodwill and intangible assets |  |  | 1,276 |  |  |  | 1,466 |
Unrealized losses |  |  | 614 |  |  |  | — |
Interest carryforwards |  |  | 437 |  |  |  | 2,235 |
NOLs – U.S. |  |  | 382 |  |  |  | 510 |
Outside basis differences |  |  | 122 |  |  |  | 122 |
Operating lease liabilities |  |  | — |  |  |  | 4,953 |
Other |  |  | 376 |  |  |  | 111 |
Deferred tax assets |  |  | 28,094 |  |  |  | 33,589 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets and prepaid assets |  |  | 257 |  |  |  | 1,261 |
Foreign currency translation adjustment |  |  | 181 |  |  |  | 293 |
Unremitted earnings – International subsidiaries |  |  | 118 |  |  |  | 138 |
Allocated equity component of Convertible Notes |  |  | — |  |  |  | 1,022 |
Right of use assets – operating leases |  |  | — |  |  |  | 3,927 |
Deferred tax liabilities |  |  | 556 |  |  |  | 6,641 |
Total deferred tax assets less deferred tax liabilities |  |  | 27,538 |  |  |  | 26,948 |
Less: Valuation allowance |  |  | (18,657 | ) |  |  | (18,885 | )
Deferred tax assets, net |  | $ | 8,881 |  |  | $ | 8,063 |
Net Operating and Capital Losses – U.S. The Company’s tax effected net operating losses (“NOLs”) at December 31, 2021 were $382, 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, 2021 were $16,601. These capital losses expire between the years 2023 and 2026. Net Operating Losses – International One of the Company’s European subsidiaries generated NOLs outside the U.S. These tax effected NOLs, all of which are carried forward indefinitely, were $1,934 at December 31, 2021. 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 for uncertain tax positions and interest and penalties at the acquisition date. 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. The table below sets forth the aggregate changes in the balance of these gross unrecognized tax benefits:
|  | Total |  |  | Unrecognized Tax Benefits |  |  | Interest and Penalties |
Balance on January 1, 2020 |  | $ | 32,101 |  |  | $ | 25,998 |  |  | $ | 6,103 |
Decrease - Lapse of statute of limitations (1) |  |  | (5,981 | ) |  |  | (4,620 | ) |  |  | (1,361 | )
Increases |  |  | 320 |  |  |  | — |  |  |  | 320 |
Foreign currency translation (2) |  |  | 576 |  |  |  | 472 |  |  |  | 104 |
Balance at December 31, 2020 |  | $ | 27,016 |  |  | $ | 21,850 |  |  | $ | 5,166 |
Decrease - Lapse of statute of limitations (1) |  |  | (5,171 | ) |  |  | (3,559 | ) |  |  | (1,612 | )
Increases |  |  | 173 |  |  |  | — |  |  |  | 173 |
Foreign currency translation (2) |  |  | (93 | ) |  |  | (73 | ) |  |  | (20 | )
Balance at December 31, 2021 |  | $ | 21,925 |  |  | $ | 18,218 |  |  | $ | 3,707 |
(1) | Recorded as an income tax benefit along with an equal and offsetting amount recorded in other losses and gains, net, to recognize a reduction in the indemnification asset.
(2) | The gross unrecognized tax benefits were accrued in British pounds.
In January 2022, an audit of ManJer’s tax returns (a Jersey-based subsidiary) for the years ended December 31, 2014, 2016, 2017 and 2018 were resolved in favor of ManJer. Gross unrecognized tax benefits of $13,408 (including interest and penalties of $1,219) will be recognized during the three months ended March 31, 2022 and will have an impact on the Company’s effective tax rate. There will also be an equal and offsetting adjustment to the indemnification asset which will be recorded in income before taxes. The gross unrecognized tax benefits and interest and penalties totaling $21,925 and $27,016 at December 31, 2021 and 2020, 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 $7,032 (including interest and penalties of $2,075) in the next 12 months upon lapsing of the statute of limitations. In addition, gross unrecognized tax benefits of $13,408 will be recognized during the three months ended March 31, 2022, resulting from the favorable resolution of the audit of ManJer’s tax returns for the years 2014, 2016, 2017 and 2018. At December 31, 2021 there were $21,925 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 and is currently under review by the State of Michigan for the years ended 2017 through 2020. As of December 31, 2021, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for the years before 2017. ManJer’s tax returns (a Jersey-based subsidiary) were previously under review for the years ended December 31, 2014, 2016, 2017 and 2018. In January 2022, the audit was resolved in favor of ManJer. 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 repatriates earnings of its foreign subsidiaries and therefore has recognized a deferred tax liability of $118 and $138 at December 31, 2021 and 2020, respectively.

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