XML 48 R27.htm IDEA: XBRL DOCUMENT v3.23.1
Income Taxes
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
20. Income Taxes
Effective Income Tax Rate – Three Months Ended March 31, 2023 and March 31, 2022
The Company’s effective income tax rate during the three months ended March 31, 2023 was 7.9% resulting in income tax expense of $1,383. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a
non-taxable
gain on revaluation of deferred consideration and a $1,353 reduction in unrecognized tax benefits (including interest and penalties). These items were partly offset by a
non-deductible
loss on extinguishment of our convertible notes and an increase in the deferred tax asset valuation allowance on losses recognized on the Company’s investments.
The Company’s effective income tax rate during the three months ended March 31, 2022 of 62.0% resulted in an income tax benefit of $16,713. The 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), a lower tax rate on foreign earnings and tax windfalls associated with the vesting of stock-based compensation awards. 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.
Deferred Tax Assets
A summary of the components of the Company’s deferred tax assets at March 31, 2023 and December 31, 2022 is as follows:
 
        
March 31,

2023
     
December 31,

2022
  
 
Deferred tax assets:
                  
 
Capital losses
      $         17,740             $         17,541       
 
Unrealized losses
      4,781             3,821       
 
NOLs—Foreign
      1,625             1,609       
 
Accrued expenses
      1,527             6,030       
 
Goodwill and intangible assets
      1,038             1,085       
 
Stock-based compensation
      865             1,526       
 
Interest carryforwards
      476             —       
 
Operating lease liabilities
      260             313       
 
Foreign currency translation adjustment
      254             173       
 
NOLs—U.S.
      127             255       
 
Outside basis differences
      122             122       
 
        
March 31,

2023
     
December 31,
2022
  
 
Other
      355             341       
      
 
 
     
 
 
  
 
Deferred tax assets
      29,170             32,816       
      
 
 
     
 
 
  
 
Deferred tax liabilities:
                  
 
Fixed assets and prepaid assets
      150             278       
 
Unremitted earnings—European subsidiaries
      246             205       
 
Right of use assets—operating leases
      260             313       
      
 
 
     
 
 
  
 
Deferred tax liabilities
      656             796       
      
 
 
     
 
 
  
 
Total deferred tax assets less deferred tax liabilities
      28,514             32,020       
 
Less: Valuation allowance
      (22,643)            (21,484)      
      
 
 
     
 
 
  
 
Deferred tax assets, net
      $ 5,871             $ 10,536       
      
 
 
     
 
 
  
Net Operating and Capital Losses—U.S.
The Company’s tax effected net operating losses (“NOLs”) at March 31, 2023 were $127, 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 March 31, 2023 were $17,740. These capital losses expire between the years 2023 and 2028.
Net Operating Losses—Europe
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 $1,625 at March 31, 2023.
Valuation Allowance
The Company’s valuation allowance has been established on its net capital 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 at January 1, 2023
        $         1,353      $         957      $         396  
Decrease—Lapse of statute of limitations
        (1,353 )         (957 )         (396 )   
      
 
 
 
   
 
 
 
   
 
 
 
Balance at March 31, 2023
        $ —        $ —        $ —    
      
 
 
 
   
 
 
 
   
 
 
 
 
 
(1)
The gross unrecognized tax benefits were accrued in British pounds.
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. As of March 31, 2023, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for the years before 2018.
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 $246 and $205 at March 31, 2023 and December 31, 2022, respectively.