XML 45 R29.htm IDEA: XBRL DOCUMENT v3.22.2
Income Taxes
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
20. Income Taxes     
Effective Income Tax Rate – Three and Six Months Ended June 30, 2022
The Company’s effective income tax rate during the three months ended June 30, 2022 of 25.0% resulted in income tax expense of $2,673. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due a valuation allowance on losses recognized on securities owned and
non-deductible
executive compensation. These items were partly offset by a
non-taxable
gain on revaluation of deferred consideration and a lower tax rate on foreign earnings.
The Company’s effective income tax rate
benefit
during the six months ended June 30, 2022 of 86.2% resulted in an income tax benefit of $14,040. The Company’s effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a $19,897 reduction in unrecognized tax benefits (including interest and penalties) and a lower tax rate on foreign earnings. These items were partly offset by a
non-taxable
loss on revaluation of deferred consideration and an increase in the deferred tax asset valuation allowance on losses recognized on securities owned.
Effective Income Tax Rate – Three and Six Months Ended June 30, 2021
The Company’s effective income tax rate during the three months ended June 30, 2021 of 19.5% resulted in income tax expense of $4,259. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a lower tax rate on foreign earnings.
The Company’s effective income tax rate for the six months ended June 30, 2021 of 6.5% resulted in income tax expense of $2,290. The effective income tax rate differs from the federal statutory rate of 21% primarily due to a $5,171 reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation and state and local taxes.
Deferred Tax Assets
A summary of the components of the Company’s deferred tax assets at June 30, 2022 and December 31, 2021 are as follows:
 
    
June 30,

2022
     
December 31,
2021
  
Deferred tax assets:
                  
Capital losses
    $ 16,953      $ 16,601  
Accrued expenses
      2,833        4,993  
Unrealized losses
      2,559        614  
NOLs – Foreign
      1,677        1,934  
Goodwill and intangible assets
      1,181        1,276  
Interest carryforwards
      1,066        437  
Stock-based compensation
      741        1,359  
Foreign currency translation adjustment
      405        —    
NOLs – U.S.
      255        382  
Outside basis differences
      122        122  
Other
      357        376  
    
 
 
     
 
 
  
Deferred tax assets
      28,149        28,094  
    
 
 
     
 
 
  
 
  
June 30,

2022
 
  
December 31,
2021
 
Deferred tax liabilities:
                  
Fixed assets and prepaid assets
      597        257  
Unremitted earnings – International subsidiaries
      174        118  
Foreign currency translation adjustment
      —          181  
    
 
 
     
 
 
  
Deferred tax liabilities
      771        556  
    
 
 
     
 
 
  
Total deferred tax assets less deferred tax liabilities
      27,378        27,538  
Less: Valuation allowance
      (21,311 )       (18,657 ) 
    
 
 
     
 
 
  
Deferred tax assets, net
    $ 6,067      $ 8,881  
    
 
 
     
 
 
  
Net Operating and Capital Losses – U.S.
The Company’s tax effected net operating losses (“NOLs”) at June 30, 2022 were $255, 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 June 30, 2022 were $16,953. These capital losses expire between the years 2023 and 2027.
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 $1,677 at June 30, 2022.
Valuation Allowance
The Company’s valuation allowance has been established on its net capital losses, international net operating losses, unrealized 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, 2022
    $ 21,925      $ 18,218      $ 3,707  
Decrease—Settlements
(1)

      (13,052 )       (11,865 )       (1,187 ) 
Decrease—Lapse of statute of limitations
(1)

      (6,845 )       (4,825 )       (2,020 ) 
Increases
      7        —          7  
Foreign currency translation
(2)
      (583 )       (485 )       (98 ) 
 
   
 
 
     
 
 
     
 
 
  
Balance at March 31, 2022
    $ 1,452      $ 1,043      $ 409  
Increases
      7        —          7  
Foreign currency translation
(2)
      (108 )       (78 )       (30 ) 
 
   
 
 
     
 
 
     
 
 
  
Balance at June 30, 2022
    $ 1,351      $ 965      $ 386  
    
 
 
     
 
 
     
 
 
  
 
(1)
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. The settlement, as well as the reduction in unrecognized tax benefits from the lapse of the statute of limitations totaling $19,897 during the three months ended March 31, 2022, was recorded as an income tax benefit with an equal and offsetting amount recorded in other losses and gains, net, to recognize a reduction in the indemnification asset. During the three months ended March 31, 2021, an income tax benefit of $5,171 was recorded along with an equal and offsetting amount in other losses and gains, net.
(2)
The gross unrecognized tax benefits were accrued in British pounds.


The gross unrecognized tax benefits and interest and penalties totaling $1,351 at June 30, 2022 are included in other
non-current
liabilities in the Consolidated Balance Sheets. It is reasonably possible that these unrecognized tax benefits will reduce to zero in the next 12 months upon lapsing of the statute of limitations. If recognized, these unrecognized tax benefits 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 June 30, 2022, 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 $
174
and $
118
at June 
30
,
2022
and December 
31
,
2021
, respectively.