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Note 23 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 23. INCOME TAXES ﻿ Cohen & Company Inc. is treated as a C corporation for United States federal income tax purposes. The components of income tax expense (benefit) included in the consolidated statements of operations for each year presented herein are shown in the table below.
INCOME TAX EXPENSE
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax expense (benefit) |  | $ | - |  |  | $ | (1 | ) |  | $ | (29 | )
Foreign income tax expense (benefit) |  |  | 122 |  |  |  | 156 |  |  |  | 26 |
State and local income tax expense (benefit) |  |  | 86 |  |  |  | - |  |  |  | - |
|  |  | 208 |  |  |  | 155 |  |  |  | (3 | )
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax expense (benefit) |  |  | (7,430 | ) |  |  | (324 | ) |  |  | (722 | )
Foreign income tax expense (benefit) |  |  | - |  |  |  | - |  |  |  | - |
State and local income tax expense (benefit) |  |  | (1,447 | ) |  |  | (354 | ) |  |  | (116 | )
|  |  | (8,877 | ) |  |  | (678 | ) |  |  | (838 | )
Total |  |  | (8,669 | ) |  |  | (523 | ) |  |  | (841 | )
The components of income (loss) before income taxes is shown below. ﻿
INCOME (LOSS) BEFORE INCOME TAXES
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Domestic |  | $ | 30,317 |  |  | $ | (4,400 | ) |  | $ | (3,864 | )
Foreign |  |  | (533 | ) |  |  | 304 |  |  |  | (964 | )
Total |  | $ | 29,784 |  |  | $ | (4,096 | ) |  | $ | (4,828 | )
The Company had no prepaid taxes in the consolidated balance sheet as of December 31, 2020 and 2019, respectively. ﻿ The expected income tax expense /(benefit) using the federal statutory rate differs from income tax expense / (benefit) pertaining to pre-tax income / (loss) as a result of the following for the years ended December 31, 2020 , 2019 , and 2018 . ﻿ ﻿
INCOME TAX RATE RECONCILIATION
(Dollars in Thousands)
|  | For the Year Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Federal statutory rate |  | $ | 4,145 |  |  | $ | (860 | ) |  | $ | (1,014 | )
Pass thru impact |  |  | (2,945 | ) |  |  | 319 |  |  |  | 394 |
Deferred tax valuation allowance |  |  | (10,183 | ) |  |  | 153 |  |  |  | 17 |
State and local tax |  |  | 192 |  |  |  | (291 | ) |  |  | (263 | )
Foreign tax |  |  | 122 |  |  |  | 156 |  |  |  | 25 |
Total |  | $ | (8,669 | ) |  | $ | (523 | ) |  | $ | (841 | )
Deferred tax assets and liabilities are determined based on the difference between the book basis and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. The recognition of deferred tax assets is reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. ﻿ The components of the net deferred tax asset (liability) are as follows. ﻿
DEFERRED TAX ASSET AND LIABILITY
(Dollars in Thousands)
|  | As of December 31, 2020 |  |  | As of December 31, 2019 |
|  | Asset |  |  | Liability |  |  | Net |  |  | Asset |  |  | Liability |  |  | Net |
Federal net operating loss carry-forward |  | $ | 20,579 |  |  | $ | - |  |  | $ | 20,579 |  |  | $ | 21,508 |  |  | $ | - |  |  | $ | 21,508 |
State net operating loss carry-forward |  |  | 4,238 |  |  |  | - |  |  |  | 4,238 |  |  |  | 5,061 |  |  |  | - |  |  |  | 5,061 |
Federal capital loss carry-forward |  |  | 7,311 |  |  |  | - |  |  |  | 7,311 |  |  |  | 47,027 |  |  |  | - |  |  |  | 47,027 |
Unrealized gain on debt |  |  | - |  |  |  | (5,670 | ) |  |  | (5,670 | ) |  |  | - |  |  |  | (7,911 | ) |  |  | (7,911 | )
Investment in Operating LLC |  |  | 14,402 |  |  |  | - |  |  |  | 14,402 |  |  |  | 24,569 |  |  |  | - |  |  |  | 24,569 |
Other |  |  | 312 |  |  |  | - |  |  |  | 312 |  |  |  | 2,525 |  |  |  | - |  |  |  | 2,525 |
Gross deferred tax asset / (liability) |  |  | 46,842 |  |  |  | (5,670 | ) |  |  | 41,172 |  |  |  | 100,690 |  |  |  | (7,911 | ) |  |  | 92,779 |
Less: valuation allowance |  |  | (33,775 | ) |  |  | - |  |  |  | (33,775 | ) |  |  | (94,118 | ) |  |  | - |  |  |  | (94,118 | )
Net deferred tax asset / (liability) |  | $ | 13,067 |  |  | $ | (5,670 | ) |  | $ | 7,397 |  |  | $ | 6,572 |  |  | $ | (7,911 | ) |  | $ | (1,339 | )
As of December 31, 2020 , the Company had a federal net operating loss (“NOL”) of approximately $97,995, which will be available to offset future taxable income, subject to limitations described below. If not used, this NOL will begin to expire in 2029. The Company also had net capital losses (“NCLs”) in excess of capital gains of $34,815 as of December 31, 2020 , which can be carried forward to offset future capital gains, subject to the limitations described below. If not used, this carryforward will begin to expire in 2021. No assurance can be made that the Company will have future taxable income or future capital gains to benefit from its NOL and NCL carryovers. ﻿ The Company has determined that its NOL and NCL carryovers are not currently limited by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). However, the Company may experience an ownership change as defined in that section (“Ownership Change”) in the future. ﻿ If an Ownership Change were to occur in the future, the Company's ability to use its NOLs, NCLs, and certain recognized built-in losses to reduce its taxable income in a future year would generally be limited to an annual amount (the “Section 382 Limitation”) equal to the fair value of the Company immediately prior to the Ownership Change multiplied by the “long term tax-exempt interest rate.” In the event of an Ownership Change, NOLs and NCLs that exceed the Section 382 Limitation in any year will continue to be allowed as carryforwards for the remainder of the carryforward period, and such NOLs and NCLs can be used to offset taxable income for years within the carryforward period subject to the Section 382 Limitation in each year. However, if the carryforward period for any NOL or NCL were to expire before that loss is fully utilized, the unused portion of that loss would be lost. See discussion of stockholder rights plan in note 21. ﻿ Notwithstanding the facts that the Company has determined that the use of its remaining NOL and NCL carryforwards are not currently limited by Section 382 of the Code, the Company recorded a valuation allowance for a substantial portion of its NOLs and NCLs when calculating its net deferred tax liability as of December 31, 2020 . The valuation allowance was recorded because the Company determined it is not more likely than not that it will realize these benefits. ﻿ During 2020, the Company recognized a significant deferred tax benefit. The deferred tax benefit was a U.S. tax benefit, which was the result of the reduction in the valuation allowance applied against the Company's NOL and NCL tax assets. Prior to 2020, the Company had concluded that due to its recent history of tax losses, it should only recognize its NOL asset to the extent the reversal of its deferred tax liability amounts could be scheduled against it. For the NCL tax asset, it applied a full valuation allowance. In 2020, the Company generated significant taxable income (both ordinary and capital) and expects to generate income going forward. Accordingly, as of December 31, 2020, the Company adjusted the calculation of the valuation allowances applied against its NOL and NCL asset. The Company now applies both the expected reversal of its deferred tax liability as well as an expected level of income based on 2020 actual results projected forward. The recent improvement of the Company's operations was the result of income earned from the sponsorship of and investment in SPACs (mostly capital income) as well as improving operations of its other business lines (mostly operating income). The Company will continue to reevaluate its operations on a quarterly basis and may make further adjustments to its tax valuation allowances going forward as is necessary. These adjustments could be material and could result in additional tax benefit or tax expense. These adjustments will only impact our deferred tax assets, liabilities, and expense or benefit. The Company's current tax expense or benefit will not be impacted by these adjustments. ﻿ The Company had no unrecognized tax benefits in the periods presented. ﻿ The Company files tax returns in the U.S. federal jurisdiction, various states or local jurisdictions, the United Kingdom, Ireland, and France. With few exceptions, the Company is no longer subject to examination for years prior to 2015. ﻿

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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