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Income taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The income tax provision shown in the consolidated statements of operations is reconciled to amounts of tax that would have been payable (recoverable) from the application of the federal tax rate to pre-tax profit, as follows:
(Expressed in thousands) |  |  |  |  |  |  |  |  |  |  |
| For the Year Ended December 31,
| 2014 |  | 2013 |  | 2012
| Amount |  | Percentage |  | Amount |  | Percentage |  | Amount |  | Percentage
U.S. federal statutory income tax rate | $ | 9,008 |  |  | 35.0 | % |  | $ | 15,368 |  |  | 35.0 | % |  | $ | (184 | ) |  | 35.0 | %
U.S. state and local income taxes, net of U.S. federal income tax benefits | 2,033 |  |  | 7.9 | % |  | 2,131 |  |  | 4.9 | % |  | (1,585 | ) |  |
Unrecognized tax benefit | 6 |  |  | — | % |  | 1,244 |  |  | 2.8 | % |  | 1,524 |  |  |
Tax exempt income, net of interest expense | (528 | ) |  | -2.0 | % |  | (715 | ) |  | -1.6 | % |  | (561 | ) |  |
Non-deductible regulatory settlements | 5,298 |  |  | 20.6 | % |  | — |  |  | — | % |  | 306 |  |  |
Business promotion and other non-deductible expenses | 655 |  |  | 2.5 | % |  | 660 |  |  | 1.5 | % |  | 545 |  |  |
Insurance proceeds, non-taxable | (65 | ) |  | -0.3 | % |  | (597 | ) |  | -1.4 | % |  | (349 | ) |  |
Adjustment to reflect prior year tax return filings | 256 |  |  | 1.0 | % |  | (251 | ) |  | -0.6 | % |  | (294 | ) |  |
Tax rate change on deferred income taxes | 241 |  |  | 0.9 | % |  | 208 |  |  | 0.5 | % |  | 390 |  |  |
Non-U.S. operations | (447 | ) |  | -1.7 | % |  | 185 |  |  | 0.4 | % |  | 678 |  |  |
Other | (282 | ) |  | -1.1 | % |  | (477 | ) |  | -1.1 | % |  | (146 | ) |  |
Total income tax expense | $ | 16,175 |  |  | 62.8 | % |  | $ | 17,756 |  |  | 40.4 | % |  | $ | 324 |  |  | n/m |
n/m = not meaningful Income taxes included in the consolidated statements of operations represent the following:
(Expressed in thousands) |  |  |  |  |
| For the Year Ended December 31,
| 2014 |  | 2013 |  | 2012
Current: |  |  |  |  |
U.S. federal tax (benefit) | $ | 10,302 |  |  | $ | (2,984 | ) |  | $ | 19,918 |
State and local tax | 1,520 |  |  | 1,885 |  |  | 2,765 |
Non-U.S. operations | (264 | ) |  | 116 |  |  | (61 | )
Total Current | 11,558 |  |  | (983 | ) |  | 22,622 |
Deferred: |  |  |  |  |
U.S. federal tax (benefit) | 1,273 |  |  | 16,658 |  |  | (17,303 | )
State and local tax (benefit) | 2,057 |  |  | 2,482 |  |  | (4,890 | )
Non-U.S. operations | 1,287 |  |  | (401 | ) |  | (105 | )
Total Deferred | 4,617 |  |  | 18,739 |  |  | (22,298 | )
Total | $ | 16,175 |  |  | $ | 17,756 |  |  | $ | 324 |
Profit (loss) before income taxes with respect to foreign operations was $4.3 million, $(1.3) million and $(2.4) million for the years ended December 31, 2014, 2013 and 2012, respectively. Tax expense for 2014 was lower than in 2013 primarily because the Company earned less pretax income in 2014 than in 2013. The effective tax rate for 2014 was higher than in 2013 mainly due to nondeductible penalties incurred in 2014 pursuant to regulatory settlements. U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such taxable temporary differences totaled $18.4 million as of December 31, 2014. The unrecognized deferred tax liability associated with earnings of foreign subsidiaries, net of associated U.S. foreign tax credits, is $2.3 million for those subsidiaries with respect to which the Company would be subject to residual U.S. tax on cumulative earnings through 2014 were those earnings to be repatriated. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2014 and 2013 were as follows:
(Expressed in thousands) |  |  |
| For the Year Ended December 31,
| 2014 |  | 2013
Deferred tax assets: |  |  |
Employee deferred compensation plans | $ | 30,969 |  |  | $ | 31,213 |
Deferred rent | 10,024 |  |  | 10,451 |
Lease incentive | 6,212 |  |  | 6,693 |
Broker notes | 3,460 |  |  | 3,915 |
Auction rate securities reserve | 3,229 |  |  | 3,669 |
Net operating loss | 2,896 |  |  | 4,587 |
Involuntary conversion | 2,033 |  |  | 1,866 |
Reserve for litigation and legal fees | 5,808 |  |  | 1,659 |
Allowance for doubtful accounts | 984 |  |  | 1,002 |
State and local net operating loss/credit carryforward | 357 |  |  | 1,993 |
Other | 2,650 |  |  | 2,757 |
Total deferred tax assets | 68,622 |  |  | 69,805 |
Valuation allowance | 113 |  |  | 138 |
Deferred tax assets after valuation allowance | 68,509 |  |  | 69,667 |
Deferred tax liabilities: |  |  |
Goodwill amortization (Section 197) | 48,025 |  |  | 43,728 |
Partnership investments | 10,865 |  |  | 12,039 |
Mortgage servicing rights | 12,173 |  |  | 9,889 |
Company owned life insurance | 6,501 |  |  | 5,173 |
Change in accounting method | 2,591 |  |  | 3,895 |
Book versus tax depreciation differences | 982 |  |  | 1,437 |
Other | 469 |  |  | 602 |
Total deferred tax liabilities | 81,606 |  |  | 76,763 |
Deferred tax liabilities, net | $ | (13,097 | ) |  | $ | (7,096 | )
The Company has deferred tax assets at December 31, 2014 of $1.7 million, $898,000 and $191,000 arising from net operating losses incurred by Oppenheimer Israel (OPCO) Ltd., Oppenheimer Investments Asia Limited, and Oppenheimer Europe Ltd., respectively. The Company believes that realization of the deferred tax assets is more likely than not based on expectations of future taxable income in Israel, Asia and Europe. These net operating losses carry forward indefinitely and are not subject to expiration, provided that these subsidiaries and their underlying businesses continue operating normally (as is anticipated). The Company has a deferred tax asset of $726,000 (net of federal taxes) as of December 31, 2014 arising primarily from New York State Investment Tax Credits carried forward to future years. These credits will expire if not used by 2028. Goodwill arising from the acquisitions of Josephthal Group Inc. and the Oppenheimer Divisions is being amortized for tax purposes on a straight-line basis over 15 years. The difference between book and tax is recorded as a deferred tax liability. The Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. The Company has closed tax years through 2010 in the U.S. federal jurisdiction. The Company is under examination in various states and overseas jurisdictions in which the Company has significant business operations. The Company has closed tax years through 2007 for New York State and is currently under exam for the period 2008 to 2011. The Company also has closed tax years through 2008 with New York City and is currently under exam for the 2009-2012 tax years. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2008. The Company has unrecognized tax benefits of $1.6 million, $1.6 million and $5.2 million as of December 31, 2014, 2013 and 2012, respectively (as shown on the table below). Included in the balance of unrecognized tax benefits as of December 31, 2014 and 2013 are $1.3 million of tax benefits for either year that, if recognized, would affect the effective tax rate. During the year ended December 31, 2013, the Company reclassified $4.9 million of unrecognized tax benefit to other tax accounts when the Internal Revenue Service approved the Company’s application for a tax accounting method change. A reconciliation of the beginning and ending amount of unrecognized tax benefit follows:
(Expressed in thousands) |  |  |  |  |
| 2014 |  | 2013 |  | 2012
Balance at January 1, | $ | 1,574 |  |  | $ | 5,236 |  |  | $ | 2,317 |
Additions for tax positions of prior years | — |  |  | 1,168 |  |  | 2,919 |
Additions for tax positions of current year | 9 |  |  | 77 |  |  | — |
Reclass to other tax accounts | — |  |  | (4,907 | ) |  | — |
Balance at December 31, | $ | 1,583 |  |  | $ | 1,574 |  |  | $ | 5,236 |
On its consolidated statements of operations, the Company records interest and penalties accruing on unrecognized tax benefits in income before taxes as interest expense and other expense, respectively. For the years ended December 31, 2014 and 2013, the Company recorded tax-related interest expense and benefit of $22,000 and $(284,000), respectively, in its statement of operations. At December 31, 2014 and 2013, the Company had an income tax-related interest payable of $83,000 and $61,000, respectively, on its consolidated balance sheet.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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