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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
AB, a private limited partnership, is not subject to federal or state corporate income taxes. However, AB is subject to a 4.0% New York City unincorporated business tax (“UBT”). Our domestic corporate subsidiaries are subject to federal, state and local income taxes, and generally are included in the filing of a consolidated federal income tax return. Separate state and local income tax returns also are filed. Foreign corporate subsidiaries generally are subject to taxes in the jurisdictions where they are located.
In order to preserve AB’s status as a private partnership for federal income tax purposes, AB Units must not be considered publicly traded. The AB Partnership Agreement provides that all transfers of AB Units must be approved by EQH and the General Partner; EQH and the General Partner approve only those transfers permitted pursuant to one or more of the safe harbors contained in the relevant Treasury regulations. If AB Units were considered readily tradable, AB’s net income would be subject to federal and state corporate income tax, significantly reducing its quarterly distribution to AB Holding. Furthermore, should AB enter into a substantial new line of business, AB Holding, by virtue of its ownership of AB, would lose its status as a publicly traded partnership and would become subject to corporate income tax, which would reduce materially AB Holding’s net income and its quarterly distributions to AB Holding Unitholders.
Earnings before income taxes and income tax expense consist of:
Years Ended December 31
202420232022
(in thousands)
Earnings before income taxes:
United States$1,075,305 $714,732 $689,278 
Foreign183,323 102,938 125,818 
Total$1,258,628 $817,670 $815,096 
Income tax expense:
Partnership UBT$12,458 $7,838 $5,996 
Corporate subsidiaries:
Federal899 2,855 1,457 
State and local1,345 914 931 
Foreign51,764 35,906 34,327 
Current tax expense66,466 47,513 42,711 
Deferred tax (1,323)(18,462)(3,072)
Income tax expense$65,143 $29,051 $39,639 
The principal reasons for the difference between the effective tax rates and the UBT statutory tax rate of 4.0% are as follows:
Years Ended December 31
202420232022
(in thousands)
UBT statutory rate$50,345 4.0 %$32,707 4.0 %$32,604 4.0 %
Corporate subsidiaries' federal, state, and local2,236 0.2 4,538 0.6 1,460 0.2 
Foreign subsidiaries taxed at different rates42,384 3.4 36,788 4.5 32,664 4.0 
FIN 48 reserve (release)— — (2,838)(0.3)— — 
UBT business allocation percentage rate change(634)(0.1)(1,049)(0.1)(98)— 
Deferred tax and payable write-offs911 0.1 1,750 0.2 1,089 0.1 
Foreign outside basis difference126 — 3,414 0.4 (1,535)(0.2)
Valuation allowance reserve (release)(16)— (22,447)(2.7)— — 
Effect of ASC 740 adjustments, miscellaneous taxes, and other3,474 0.3 3,553 0.4 5,366 0.7 
Tax Credits(29)— (1,604)(0.2)(5,275)(0.6)
Income not taxable resulting from use of UBT business apportionment factors and effect of compensation charge(33,654)(2.7)(25,761)(3.2)(26,636)(3.3)
Income tax expense and effective tax rate$65,143 5.2 %$29,051 3.6 %$39,639 4.9 %
We recognize the effects of a tax position in the financial statements only if, as of the reporting date, it is “more likely than not” to be sustained based on its technical merits and its applicability to the facts and circumstances of the tax position. In making this assessment, we assume that the taxing authority will examine the tax position and have full knowledge of all relevant information.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Years Ended December 31
202420232022
(in thousands)
Balance as of beginning of period$— $2,838 $2,838 
Additions for prior year tax positions— — — 
Reductions for prior year tax positions— — — 
Additions for current year tax positions— — — 
Reductions for current year tax positions— — — 
Reductions related to closed years/settlements with tax authorities— (2,838)— 
Balance as of end of period$— $— $2,838 
The amount of unrecognized tax benefits as of December 31, 2024, 2023, and 2022, when recognized, is recorded as a reduction to income tax expense and reduces the company’s effective tax rate.
Interest and penalties, if any, relating to tax positions are recorded in income tax expense on the consolidated statements of income. As of December 31, 2024, 2023, and 2022, there is no accrued interest or penalties recorded on the consolidated statements of financial condition.
Generally, the company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for any year prior to 2020, except as set forth below.
During the third quarter of 2023, the City of New York notified us of an examination of AB's UBT returns for the years 2020 through 2021. The examination is ongoing and no provision with respect to this examination has been recorded.
Currently, there are no income tax examinations at our significant non-U.S. subsidiaries. Years that remain open and may be subject to examination vary under local law and range from one to seven years.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effect of significant items comprising the net deferred tax asset (liability) is as follows:
Years Ended December 31
20242023
(in thousands)
Deferred tax asset:
Differences between book and tax basis:
Benefits from net operating loss carryforwards$14,242 $11,360 
Long-term incentive compensation plans11,295 12,519 
Investment basis differences12,977 11,890 
Depreciation and amortization3,647 3,706 
Lease liability5,940 4,324 
Investment in foreign subsidiaries— 33,427 
Capital loss carryforward34,069 — 
Tax credits carryforward5,300 5,710 
Other, primarily accrued expenses deductible when paid9,181 8,988 
96,651 91,924 
Less: valuation allowance(25,996)(28,579)
Deferred tax asset70,655 63,345 
Deferred tax liability:  
Differences between book and tax basis:  
Intangible assets12,254 11,454 
Investment in foreign subsidiaries5,697 — 
Right-of-use asset5,168 3,730 
Other2,485 3,020 
Deferred tax liability25,604 18,204 
Net deferred tax asset$45,051 $45,141 
Valuation allowances of $26.0 million and $28.6 million were established as of December 31, 2024 and 2023, respectively, primarily due to significant negative evidence that capital losses generated in the sale of foreign subsidiaries will not be utilized, given the nature of income expected to be incurred by the applicable subsidiaries. As a result of the deconsolidation of BRS and contribution to the JVs in 2024, capital loss carry forwards of $140.2 million were generated from the contribution of foreign entities into the JV’s and was reflected in the prior year as an investment in subsidiaries deferred tax asset. The capital loss carryforward has a five year expiration period. We had net operating loss carryforwards at December 31, 2024 and 2023 of approximately $56.7 million and $44.0 million, respectively, in certain foreign locations with a five year expiration period.
The deferred tax asset is included in other assets in our consolidated statement of financial condition. Management believes there will be sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets recognized that are not subject to valuation allowances.
The company provides income taxes on the unremitted earnings of non-U.S. corporate subsidiaries except to the extent that such earnings are indefinitely reinvested outside the United States. As of December 31, 2024, $29.6 million of undistributed earnings of non-U.S. corporate subsidiaries were indefinitely invested outside the U.S. At existing applicable income tax rates, additional taxes of approximately $6.1 million would need to be paid if such earnings are remitted.