Income Taxes

The Tax Cuts and Jobs Act was passed on December 22, 2017. Among other federal tax law changes, for taxable years beginning after December 31, 2017, the new law establishes a flat corporate income tax rate of 21% to replace our current rate of 35% and eliminates the corporate alternative minimum tax. In accordance with FASB ASC 740, Income Taxes ("ASC 740"), the Company has recorded tax expense of $3.6 million resulting from the re-measurement of the Company's estimated net deferred tax assets as of December 31, 2017.

The following table represents the Company's provision for income taxes:



	As of December 31,
	2017		2016		2015
Current city income tax provision	$	1,463,669	$	1,321,675	$	1,245,285
Current state income tax provision	310,726		642,598		335,897
Current federal income tax provision	24,749,832		24,234,050		22,874,571
Deferred federal income tax expense (benefit)	2,893,063		469,312		(3,547,088		)
Provision for income taxes	$	29,417,290	$	26,667,635	$	20,908,665

A reconciliation of income tax expense at the statutory federal rate to the Company’s income tax expense is as follows:



	2017			2016			2015
Income tax computed at statutory rate	$	28,356,636		$	25,641,618		$	20,294,107
Benefit attributable to redeemable noncontrolling interests^(a)	(564,449		)	(189,773		)	—
City and state income taxes, net of federal benefit	1,153,357			1,276,777			1,027,768
Revaluation adjustment of net deferred tax assets	3,557,039			—			—
Excess tax benefits on vesting of Restricted Stock	(2,420,250		)	—			—
Income tax benefit from dividends paid on Restricted Stock	(418,583		)	—			—
Other	(246,460		)	(60,987		)	(413,210		)
Income tax expense	$	29,417,290		$	26,667,635		$	20,908,665

(a) The provision for income taxes includes a benefit attributable to the fact that the Company's operations include the Consolidated Funds which are not subject to federal income taxes. Accordingly, a portion of the Company's earnings are not subject to corporate tax levels.

Net deferred tax assets consisted of the following at December 31, 2017 and 2016:



	2017			2016
Stock-based compensation	$	2,868,719		$	4,450,129
Accrued compensation	5,795,204			7,355,744
Unrealized gains	(2,260,673		)	(1,802,708		)
Property and equipment	(467,127		)	(779,391		)
Other assets and liabilities	(92,419		)	(487,007		)
Net deferred tax assets	$	5,843,704		$	8,736,767

The net temporary differences incurred to date will reverse in future periods as the Company generates taxable earnings. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2017, no valuation allowance was deemed necessary.

The Company implemented ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" on January 1,2017. Beginning January 1, 2017, any excess tax benefits or deficiencies from the vesting of stock awards are recognized through the income tax provision as opposed to common stock. For Restricted Stock, the Company receives an excess income tax benefit calculated as the tax effect of the difference between the fair market value of the stock at the time of grant and vesting. The Company also records income tax benefits from dividends paid on Restricted Stock. This change was required to be applied prospectively to all excess tax benefits and tax deficiencies after the date of adoption of the ASU. No adjustment is recorded for any windfall benefits previously recorded in common stock. In addition, all tax-related cash flows resulting from share based payments are now reported as operating activities in the statement of cash flows under the new guidance, rather than the prior requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. The Company elected to adopt this change in cash flow presentation prospectively after the date of adoption of the ASU beginning January 1, 2017.

Prior to January 1, 2017, the Company's income taxes payable has been reduced by the tax benefits from equity incentive plan awards. These tax benefits were considered windfall tax benefits and were recognized as an increase to common stock. For Restricted Stock, the Company receives an excess income tax benefit calculated as the tax effect of the difference between the fair market value of the stock at the time of grant and vesting. The Company also records a tax benefit on dividends paid on Restricted Stock during the vesting period. The Company had net tax benefits from equity awards of $6.3 million, and $2.9 million, for the years ended December 31, 2016 and 2015, respectively.

ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not record an accrual for tax related uncertainties or unrecognized tax positions as of December 31, 2017. The Company does not expect a change to the reserve for uncertain tax positions within the next twelve months that would have a material impact on the consolidated financial statements.

The Company files a consolidated federal income tax return. It is the policy of the Company to allocate the consolidated tax provision to subsidiaries as if each subsidiary’s tax liability or benefit were determined on a separate company basis. As part of the consolidated group, subsidiaries transfer to the Company their current federal tax liabilities or assets. The Company also files income tax returns in all applicable state and local jurisdictions. The Company is subject to federal, state and local examinations by tax authorities for the tax years ended December 31, 2014 through 2017.