XML 36 R20.htm IDEA: XBRL DOCUMENT v3.25.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The amounts provided for income taxes were as follows:
 Year Ended December 31,
 202420232022
Current:   
U.S. Federal$— $— $1,039 
State and local140 391 1,271 
 140 391 2,310 
Deferred:   
U.S. Federal(108)(10,009)1,421 
State and local1,085 (5,435)2,772 
 977 (15,444)4,193 
Total$1,117 $(15,053)$6,503 
The consolidated balance sheets of the Company include deferred income tax assets and liabilities, which represent temporary differences in the application of accounting rules established by GAAP and income tax laws. The tax effect of temporary differences which give rise to a significant portion of deferred tax assets and liabilities is as follows:
 December 31, 2024December 31, 2023
Deferred tax assets:
Basis differences on fixed and intangible assets$577 $471 
Basis differences in Notes Payable4,509 — 
Various U.S. federal and state tax loss carryforwards28,457 18,420 
Operating lease liabilities 4,764 5,141 
38,307 24,032 
Less: Valuation allowance(26,065)(7,026)
Net deferred tax assets$12,242 $17,006 
Deferred tax liabilities:
Basis differences on prepaid assets$(200)$(251)
Revenue recognition(377)(478)
Allowance for doubtful accounts(67)(68)
Basis differences on long-term investments— (46)
Basis differences on acquisition(7,769)(9,618)
Operating lease right-of-use assets (4,181)(4,490)
Other352 (1,078)
Net deferred tax liabilities$(12,242)$(16,029)
Net deferred tax assets (liabilities)$— $977 

Various U.S. federal and state net operating loss (“NOL”) carryforwards included in Deferred Tax Assets. Prior to 2019, the Company’s subsidiary, Douglas Elliman of California, Inc. (“DE California”), filed a consolidated U.S. income tax return that included its wholly owned U.S. subsidiaries. The tax effected standalone subsidiary federal and state NOL carryforwards attributable to DE California is $7,093 and $7,026 at December 31, 2024 and 2023, respectively. The deferred tax assets of Douglas Elliman of California, Inc. generated prior to March 1, 2019 are limited for use in the future to the extent of the taxable income of Douglas Elliman of California, Inc. under the “Separate Return Limitation Year” rules of Internal Revenue Code Section 381.The federal NOL carryforwards begin to expire in 2034 and losses generated in 2018 or later will carry forward indefinitely.
At December 31, 2024, the Company’s tax effected consolidated federal NOL carryforward was approximately $20,413 and tax effected consolidated state NOL carryforward was approximately $8,043. At December 31, 2023, the Company’s tax effected federal NOL carryforward was approximately $12,160 and the consolidated tax effected state NOL carryforward was approximately $6,260. (The NOL carryforwards of DE California are included in the Company’s tax effected federal and state NOL carryforwards at December 31, 2024 and 2023, respectively.)
Valuation Allowances. ASC 740, Income Taxes, requires the Company to establish a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. If such determination is made and future losses are incurred over the period in which the net deferred tax assets are deductible, the Company believes it will be more likely than not that the benefits of these deductible differences will not be realized, and as a result will be required to maintain a valuation allowance for the full amount of the deferred tax assets.
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion of the deferred income tax will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to expiration of the net operation loss carryforwards.
At December 31, 2023, the Company had recorded a valuation allowance of $7,026 against the deferred tax asset related to the NOL carryforwards attributable to DE California because the utilization of its NOL carryforwards were limited by the Separate Return Limitation Year limitations of Internal Revenue Code Section 381 and, consequently, the Company had determined it was more likely than not that the deferred tax assets associated with these NOLs would not be realized because
DE California had a history of cumulative losses over the three previous years and, consequently, the Company was unable to utilize the NOLs because DE California would not be able to utilize the NOLs on a separate return basis.
During the year ended December 31, 2024, the Company evaluated its history of cumulative losses over the three previous years and determined it was more likely than not that its deferred tax assets would not be utilized. Therefore, at December 31, 2024, the Company has recorded a full valuation allowance against its net deferred tax assets of approximately $26,065. The change in valuation allowance during the year ended December 31, 2024 was $19,039.
Differences between the amounts provided for income taxes and amounts computed at the federal statutory tax rate are summarized as follows:
 Year Ended December 31,
 202420232022
(Loss) income before provision for income taxes$(75,885)$(58,219)$104 
Federal income tax (benefit) expense at statutory rate(15,936)(12,226)22 
Increases (decreases) resulting from:  
State and local income taxes, net of federal income tax benefits(4,053)(3,811)2,213 
Impact of non-controlling interest144 129 163 
Non-deductible expenses1,178 2,333 1,715 
Excess tax benefits on stock-based compensation745 (857)812 
Loss carryforwards from tax consolidation of subsidiary— (609)(331)
Changes in valuation allowance, net of equity and tax audit adjustments19,039 609 1,221 
Other— (621)688 
Income tax expense (benefit)$1,117 $(15,053)$6,503 

The Company files U.S. and state and local income tax returns in jurisdictions with varying statutes of limitations. Liabilities for uncertain tax positions reflected as of December 31, 2024 and 2023 were not significant and it is not anticipated that they will materially change in the next 12 months. Although the outcome of tax audits is always uncertain, Douglas Elliman Realty, LLC believes that its tax positions will be sustained under audit.