Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The income (loss) before provision for income taxes consists of the following:

	Year Ended December 31,
	2023	2022	2021
	(Dollars in millions)
U.S. domestic income (loss)	$(857.6)	$1,402.9	$3,816.2
Foreign income	256.7	169.6	211.3
Total income (loss) before provision for income taxes	$(600.9)	$1,572.5	$4,027.5

The provision for income taxes consists of the following:

	Year Ended December 31,
	2023	2022	2021
	(Dollars in millions)
Current
Federal income tax	$186.0	$263.6	$351.3
State and local income tax	29.1	30.4	59.6
Foreign income tax	46.2	55.6	56.5
Total current	261.3	349.6	467.4
Deferred
Federal income tax	(333.4)	(25.1)	450.7
State and local income tax	(26.0)	(3.3)	48.9
Foreign income tax	(6.1)	(33.4)	15.3
Total deferred	(365.5)	(61.8)	514.9
Total provision (benefit) for income taxes	$(104.2)	$287.8	$982.3

The following table summarizes the effective income tax rate:

	Year Ended December 31,
	2023	2022	2021
	(Dollars in millions)
Income (loss) before provision for income taxes	$(600.9)	$1,572.5	$4,027.5
Provision (benefit) for income taxes	$(104.2)	$287.8	$982.3
Effective income tax rate	17.34%	18.30%	24.39%

The effective tax rate is impacted by a variety of factors, including, but not limited to, changes in the sources of

income or loss during the period and whether such income or loss is taxable to the Company and its subsidiaries. The following

table reconciles the effective income tax rate to the U.S. federal statutory tax rate:

	Year Ended December 31,
	2023	2022	2021
Statutory U.S. federal income tax rate	21.00%	21.00%	21.00%
State and local income taxes	1.55%	0.83%	2.35%
Foreign income taxes(1)	(1.19)%	(1.75)%	0.64%
Income passed through to common unitholders and non-controlling interest holders(2)	3.17%	(0.67)%	(0.07)%
Equity-based compensation	(2.76)%	(0.67)%	(0.60)%
Valuation allowance(3)	(1.02)%	0.30%	0.79%
Unrecognized tax benefits	(1.13)%	0.01%	0.02%
Other adjustments(3)	(2.28)%	(0.75)%	0.26%
Effective income tax rate	17.34%	18.30%	24.39%

(1)2022 includes a tax benefit due to restructuring the ownership of its foreign Global Investment Solutions business and the impact of amending the

Company's 2020 tax return to claim a foreign tax credit rather than the original filing position claiming a foreign tax deduction.

(2)Includes income that is not taxable to the Company and its subsidiaries.

(3)2023 includes updates to the current and/or deferred tax balances related to the filing of the Company’s 2022 tax returns. The gross impact of these

changes in estimates to Valuation allowance and Other adjustments was 1.36% and (0.86)%, respectively.

Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted tax rates in

effect for the year in which the differences are expected to reverse. The following table summarizes the tax effects of the

temporary differences:

	As of December 31,
	2023	2022
	(Dollars in millions)
Deferred tax assets
Federal foreign tax credit carryforward	$46.8	$37.3
State net operating loss carryforwards	5.7	5.9
Tax basis goodwill and intangibles	240.3	259.8
Depreciation and amortization	61.7	25.4
Deferred restricted common unit compensation	36.5	24.7
Lease liabilities	116.1	119.0
Accrued compensation	926.2	781.3
Other	109.8	140.4
Deferred tax assets before valuation allowance	1,543.1	1,393.8
Valuation allowance	(62.8)	(56.7)
Total deferred tax assets	$1,480.3	$1,337.1
Deferred tax liabilities(1)
Unrealized appreciation on investments	$1,333.8	$1,558.0
Lease right-of-use assets	87.7	89.2
Basis difference in investments	48.8	47.9
Other	38.8	28.9
Total deferred tax liabilities	$1,509.1	$1,724.0
Net deferred tax assets (liabilities)	$(28.8)	$(386.9)

(1)As of December 31, 2023 and 2022, $1,463.8 million and $1,321.3 million of deferred tax assets were offset and presented as a single deferred tax

liability amount on the Company’s consolidated balance sheet as these deferred tax assets and liabilities relate to the same jurisdiction.

The Company had $16.5 million and $15.8 million in deferred tax assets as of December 31, 2023 and 2022,

respectively, which are offset with deferred tax liabilities where those assets and liabilities relate to the same tax jurisdiction. In

both years, the deferred tax assets resulted primarily from the carryforward of federal and state tax attributes, partially offset by

a valuation allowance, and temporary differences between the financial statement and tax bases of assets and liabilities at the

Company’s foreign sub-advisor entities. The realization of the deferred tax assets is dependent on the Company’s future taxable

income before deductions related to the establishment of its deferred tax assets. The deferred tax asset balance comprises a

portion that would be realized in connection with future ordinary income and a portion that would be realized in connection

with future capital gains.

The Company evaluated various sources of evidence in determining the ultimate realizability of its deferred tax assets

including the character and timing of projected future taxable income and the Company’s ability to claim a foreign tax credit

(“FTC”). The Company continues to maintain a valuation allowance of $2.3 million on certain state net operating losses for a

corporate subsidiary with entity level state net operating losses that cannot be utilized by other group members. In addition, the

Company continues to maintain a valuation allowance of $45.1 million on certain FTC carryforwards generated in 2020 and

forward that are not expected to be realized due to federal limitations on its utilization. As of December 31, 2023 and 2022, the

Company established a total valuation allowance of $62.8 million and $56.7 million, respectively, with the net increase

primarily due to the FTC carryforward and related deferred tax assets and certain foreign net operating losses that are not

expected to be realized offset by a release of the valuation allowance on tax attribute carryforwards that were determined to be

realizable in future periods. For all other deferred tax assets, the Company has concluded it is more likely than not that they will

be realized and that a valuation allowance is not needed at December 31, 2023.

The Company has deferred tax liabilities of $45.3 million and $402.7 million as of December 31, 2023 and 2022,

respectively, which are offset with deferred tax assets where those assets and liabilities relate to the same tax jurisdiction. These

deferred tax liabilities primarily resulted from temporary differences between the financial statement and tax bases of accrued

performance allocations. These deferred tax liabilities are net of related compensation and offset by step-up in tax basis

resulting from the Conversion and future amortization of tax basis intangible assets generated from exchanges covered by the

Tax Receivable Agreement (see Note 2).

As of December 31, 2023, the Company has cumulative state pre-tax net operating loss carryforwards of

approximately $65.3 million ($5.7 million tax-effected), which will be available to offset future taxable income. If unused, a

portion of the state carryforwards will begin to expire in 2025. In addition, the Company has a FTC carryforward of $46.8

million, which relates to taxes paid in foreign jurisdictions. If unused, a portion will expire in 2025 and years forward, which is

considered in the valuation allowance evaluation referenced above.

In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign

tax regulators. With a few exceptions, as of December 31, 2023, the Company’s U.S. federal income tax returns for the years

2020 through 2022 are open under the normal three-year statute of limitations and therefore subject to examination. State and

local tax returns are generally subject to audit from 2018 to 2022. Foreign tax returns are generally subject to audit from 2011

to 2022. Certain of the Company’s affiliates are currently under audit by federal, state and foreign tax authorities. The Company

does not believe that the outcome of the audits will require it to record material reserves for uncertain tax positions or that the

outcome will have a material impact on the consolidated financial statements.

Under U.S. GAAP for income taxes, the amount of tax benefit to be recognized is the amount of benefit that is “more

likely than not” to be sustained upon examination. The Company has recorded unrecognized tax benefits of $42.3 million and

$39.3 million as of December 31, 2023 and 2022, respectively, which is reflected in accounts payable, accrued expenses and

other liabilities in the accompanying consolidated balance sheets. These balances include $17.8 million and $13.1 million

related to interest and penalties associated with uncertain tax positions as of December 31, 2023 and 2022, respectively. If

recognized, $31.2 million of uncertain tax positions would be recorded as a reduction in the provision for income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of penalties and interest,

is as follows:

	As of December 31,
	2023	2022	2021
	(Dollars in millions)
Balance at January 1	$26.2	$20.6	$17.2
Additions based on tax positions related to current year	1.5	2.4	1.3
Additions for tax positions of prior years	1.6	5.3	2.6
Reductions for tax position of prior years	(0.2)	(1.6)	(0.5)
Reductions due to lapse of statute of limitations	(4.6)	(0.5)	—
Balance at December 31	$24.5	$26.2	$20.6

The Company does not believe that it has any tax positions for which it is reasonably possible that the total amounts of

unrecognized tax benefits will significantly increase or decrease within the next twelve months.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA enacted a 15%

corporate alternative minimum tax (“CAMT”) on the “adjusted financial statement income” of certain large corporations, which

became effective on January 1, 2023. The Company does not expect the IRA to have a material impact to its provision for

income taxes given that any current year payments that would be made under CAMT would be permitted to be carried forward

and used as credits in future years resulting in a deferred tax benefit. The Company will continue to monitor as additional

guidance is released by Treasury, the IRS, and other standard-setting bodies.

On December 27, 2023, the State of New York issued final regulations that implements comprehensive franchise tax

reform for corporations, banks, and insurance companies. This did not have a material impact to the Company’s consolidated

financial statements. The Company will continue to monitor as additional guidance is released by the State of New York.