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Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
8.
Income Taxes

 

Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions.

 

As of September 30, 2023, the statutory income tax rates of the countries where the Company conducts business are 21% in the United States, 0% in Bermuda, and 25% on non-trading income, 33% on capital gains and 12.5% on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense.

The Company’s income (loss) before income taxes is derived from its U.S. subsidiaries for the quarters and nine months ended September 30, 2023 and 2022.

 

The following table summarizes the components of income tax expense (benefit):

 

 

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Current income tax benefit:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

$

(4

)

 

$

(19

)

 

$

(4

)

 

$

(19

)

Total current income tax benefit

 

$

(4

)

 

$

(19

)

 

$

(4

)

 

$

(19

)

Deferred income tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

$

1,767

 

 

$

7,457

 

 

$

4,711

 

 

$

3,418

 

Total deferred income tax expense

 

 

1,767

 

 

 

7,457

 

 

 

4,711

 

 

 

3,418

 

Total income tax expense

 

$

1,763

 

 

$

7,438

 

 

$

4,707

 

 

$

3,399

 

 

The weighted average expected tax provision has been calculated using income (loss) before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.

The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:

 

 

 

Quarters Ended September 30,

 

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

Expected tax provision at weighted average tax rate

 

$

1,987

 

 

 

21.0

%

 

$

6,549

 

 

 

21.0

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Dividend exclusion

 

 

(16

)

 

 

(0.2

)

 

 

(20

)

 

 

(0.1

)

Change in tax status

 

 

—

 

 

 

—

 

 

 

700

 

 

 

2.4

 

Parent income treated as partnership for tax

 

 

(326

)

 

 

(3.4

)

 

 

101

 

 

 

0.3

 

Other

 

 

118

 

 

 

1.2

 

 

 

108

 

 

 

0.3

 

Effective income tax expense (benefit)

 

$

1,763

 

 

 

18.6

%

 

$

7,438

 

 

 

23.9

%

 

The effective income tax expense rate for the quarter ended September 30, 2023 was 18.6% compared to an effective income tax expense rate of 23.9% for the quarter ended September 30, 2022. The difference between 2023 and 2022 is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax.

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

Expected tax provision at weighted average tax rate

 

$

5,090

 

 

 

21.0

%

 

$

44

 

 

 

21.0

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Dividend exclusion

 

 

(54

)

 

 

(0.2

)

 

 

(66

)

 

 

(31.4

)

Change in tax status

 

 

—

 

 

 

—

 

 

 

700

 

 

 

333.3

 

Parent (income) loss treated as partnership for tax

 

 

(668

)

 

 

(2.8

)

 

 

2,171

 

 

 

1,033.8

 

Other

 

 

339

 

 

 

1.4

 

 

 

550

 

 

 

261.9

 

Effective income tax expense (benefit)

 

$

4,707

 

 

 

19.4

%

 

$

3,399

 

 

 

1,618.6

%

 

The effective income tax expense rate for the nine months ended September 30, 2023 was 19.4% compared to an effective income tax expense rate of 1,618.6% for the nine months ended September 30, 2022. The difference between 2023 and 2022 is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax.

 

The Company has a net operating loss (“NOL”) carryforward of $87.3 million as of September 30, 2023, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2022 was $116.4 million.

 

The Company did not have any Section 163(j) ("163(j)") carryforward as of September 30, 2023 or December 31, 2022. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued.