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Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

20. Income Taxes

Effective Income Tax Rate – Three and Nine Months Ended September 30, 2023

The Company’s effective income tax rate during the three months ended September 30, 2023 was 31.0%, resulting in income tax expense of $5,836. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to an increase in the deferred tax asset valuation allowance on losses recognized on the Company’s investments and non-deductible executive compensation.

The Company’s effective income tax rate during the nine months ended September 30, 2023 was 11.4%, resulting in income tax expense of $10,774. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a non-taxable gain on revaluation/termination of deferred consideration—gold payments, a $1,353 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-deductible loss on extinguishment of our convertible notes, an increase in the deferred tax asset valuation allowance on losses recognized on our investments and non-deductible executive compensation.

Effective Income Tax Rate – Three and Nine Months Ended September 30, 2022

The Company’s effective income tax rate during the three months ended September 30, 2022 of 3.9% resulted in income tax expense of $3,327. 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. This was partly offset by an increase in the deferred tax asset valuation allowance on losses recognized on financial instruments owned.

The Company’s effective income tax rate during the nine months ended September 30, 2022 of negative 15.7% resulted in an income tax benefit of $10,713. 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 non-taxable gain on revaluation of deferred consideration and a lower tax rate on foreign earnings. These items were partly offset by an increase in the deferred tax asset valuation allowance on losses recognized on financial instruments owned.

Deferred Tax Assets

A summary of the components of the Company’s deferred tax assets at September 30, 2023 and December 31, 2022 is as follows:

  

September 30,

2023

 

December 31,

2022

Deferred tax assets:          
Capital losses  $19,083   $17,541 
Accrued expenses   4,447    6,030 
Unrealized losses   4,303    3,821 
Stock-based compensation   1,849    1,526 
NOLs—Foreign   1,482    1,609 
Goodwill and intangible assets   943    1,085 
Interest carryforwards   455    
—
 
Foreign currency translation adjustment   435    173 
Operating lease liabilities   151    313 
NOLs—U.S.   127    255 
Outside basis differences   122    122 
Other   382    341 
Total deferred tax assets   33,779    32,816 
Deferred tax liabilities:          
Fixed assets and prepaid assets   409    278 
Unremitted earnings—European subsidiaries   203    205 
Right of use assets—operating leases   151    313 
Total deferred tax liabilities:   763    796 
Total deferred tax assets less deferred tax liabilities   33,016    32,020 
Less: Valuation allowance   (23,508)   (21,484)
Deferred tax assets, net  $9,508   $10,536 

Capital Losses – U.S.

The Company’s tax effected capital losses at September 30, 2023 were $19,083. 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 $1,482 at September 30, 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.

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 September 30, 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 U.S. 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 $203 and $205 at September 30, 2023 and December 31, 2022, respectively.