Note 20 – Income Taxes

As a result of the Reorganization, the operating business entities of the Company were restructured and a portion of the Company’s income is subject to U.S. federal, state, local and foreign income taxes and is taxed at the prevailing corporate tax rates. Taxes Payable as of December 31, 2012 and 2011 were $20,304 and $5,159, respectively.

The following table presents the U.S. and non-U.S. components of Income (Loss) before income tax expense:


	For the Years Ended December 31,
	2012		2011			2010
U.S.	$	45,226	$	37,681		$	30,091
Non-U.S.		14,571		(7,039	)		(4,443	)

Income before Income Tax Expense(a)	$	59,797	$	30,642		$	25,648

(a)	From continuing operations, net of Noncontrolling Interest from continuing operations.

The components of the provision for income taxes reflected on the Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 consist of:


	For the Years Ended December 31,
	2012			2011			2010
Current:
Federal	$	24,956		$	2,367		$	10,054
Foreign		6,007			4,447			931
State and Local		7,912			4,942			2,256

Total Current		38,875			11,756			13,241
Deferred:
Federal		(2,458	)		11,368			3,115
Foreign		(4,756	)		(1,129	)		(340	)
State and Local		(753	)		729			161

Total Deferred		(7,967	)		10,968			2,936

Total	$	30,908		$	22,724		$	16,177

A reconciliation between the statutory federal income tax rate and the Company’s effective tax rate for the years ended December 31, 2012, 2011 and 2010 is as follows:


	For the Years Ended December 31,
	2012			2011			2010
Reconciliation of Federal Statutory Tax Rates
U.S. Statutory Tax Rate		35.0	%		35.0	%		35.0	%
Increase (Decrease) Due to State and Local Taxes		8.4	%		13.1	%		7.1	%
Rate Benefits as a Limited Liability Company/Flow Through		(6.9	%)		(5.7	%)		(10.2	%)
Foreign Taxes		2.2	%		4.3	%		0.1	%
Non-Deductible Expenses(1)		9.4	%		17.1	%		12.2	%
Valuation Allowances		(2.0	%)		(0.9	%)		0.7	%
Other Adjustments		(2.2	%)		(1.0	%)		(0.3	%)

Effective Income Tax Rate		43.9	%		61.9	%		44.6	%

(1)	Primarily related to non-deductible share-based compensation expense.

Undistributed earnings of certain foreign subsidiaries totaled approximately $2,660 as of December 31, 2012. Deferred taxes have not been provided on the undistributed earnings of certain foreign subsidiaries, as the Company considers these amounts to be indefinitely reinvested to finance international growth and expansion. As of December 31, 2012, unrecognized net deferred tax liability attributable to those reinvested earnings would have aggregated approximately $703. In the event that such amounts were ever remitted, loaned to the Company, or if the stock in the foreign subsidiary was sold, these earnings could become subject to U.S. Federal tax and an income tax provision, if any, would be recognized at that time.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Statements of Financial Condition. These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities as of December 31, 2012 and 2011 were as follows:


	December 31,
	2012		2011
Current Deferred Tax Assets:
Step up in tax basis due to the exchange of LP Units for Class A Shares	$	9,214	$	8,621

Total Current Deferred Tax Asset	$	9,214	$	8,621

Long-term Deferred Tax Assets:
Depreciation and Amortization	$	14,673	$	13,180
Compensation and Benefits		25,958		23,002
Step up in tax basis due to the exchange of LP Units for Class A Shares		181,783		154,574
Other		17,043		15,859

Total Long-term Deferred Tax Assets	$	239,457	$	206,615

Long-term Deferred Tax Liabilities:
Goodwill and Investments	$	10,008	$	11,715

Total Long-term Deferred Tax Liabilities	$	10,008	$	11,715

Net Long-term Deferred Tax Assets Before Valuation Allowance	$	229,449	$	194,900
Valuation Allowance		—		(8,211	)

Net Long-term Deferred Tax Assets	$	229,449	$	186,689

The increase in net deferred tax assets, before valuation allowance, from December 31, 2011 to December 31, 2012 was primarily attributable to an increase in the tax basis of the tangible and intangible assets of Evercore LP, which resulted from the various 2012 LP Unit exchanges and Members gifting LP Units to various charities. During 2012, the LP holders exchanged 3,091 shares of Class A Shares. This transaction resulted in an increase in the tax basis of the tangible and intangible assets of Evercore LP, which triggered an additional liability under the tax receivable agreement that was entered into in 2006 between the Company and the LP Unit holders. The agreement provides for a payment to the LP Unit holders of 85% of the cash tax savings (if any), resulting from the increased tax benefits from the exchange and for the Company to retain 15% of such benefits. Accordingly, Deferred Tax Assets – Non-Current, Amounts Due Pursuant to Tax Receivable Agreements and Additional Paid-In-Capital increased $38,974, $33,128 and $5,846, respectively, on the Company’s Consolidated Statement of Financial Condition as of December 31, 2012. See Note 14 for further discussion.

Additionally, the increase in net deferred tax assets, before valuation allowance, from December 31, 2011 to December 31, 2012 was also attributable to a $1,494 increase related to the depreciation of fixed assets and amortization of intangible assets.

The Company recorded a decrease in deferred tax assets of $(1,981) and an increase of $3,046 associated with changes in Accumulated Comprehensive Income (Loss) for the years ended December 31, 2012 and 2011, respectively.

In 2011, the Company concluded that the recoverability of its deferred tax assets in certain of its foreign subsidiaries was not more-likely-than-not to be recoverable, as required by ASC 740. As a result of the previous assessment, the Company concluded that the net deferred tax assets of these foreign subsidiaries required a full valuation allowance during those prior years.

In 2012, the Company has concluded that it is more likely than not to utilize its deferred tax asset and has reversed its valuation allowance. This determination was based on the impact of the strong positive evidence in the period related to the 2012 earnings and increases in projections of future income on management’s weighing of the positive and negative evidence.

The Company’s net operating loss and tax credit carryforwards primarily relate to carryforwards of $10,301 and $1,139 in the UK and Mexico, respectively, at December 31, 2012, which may be carried forward indefinitely in the UK and until 2017 in Mexico, subject to various limitations.

A reconciliation of the changes in tax positions for the years ended December 31, 2012, 2011 and 2010 is as follows:


	December 31,
	2012			2011			2010
Beginning unrecognized tax benefit	$	1,109		$	2,012		$	2,728
Additions for tax positions of prior years		—			98			—
Reductions for tax positions of prior years		—			—			—
Lapse of Statute of Limitations		(1,011	)		(1,001	)		(716	)

Ending unrecognized tax benefit	$	98		$	1,109		$	2,012

Included in the balance of unrecognized tax benefits at December 31, 2012, are $98 of tax benefits that, if recognized, would affect the effective tax rate. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. The Company accrued interest and penalties of $10 and $6, respectively, during 2012 related to the unrecognized tax benefits noted above and, as of December 31, 2012, the Company had recognized a liability for penalties and interest of $32 and $17, respectively. In 2012, the Company recognized tax benefits of ($228) and ($375) for penalties and interest, respectively, associated with the lapse of the statute of limitations. The Company accrued interest of $136 during 2011 related to the unrecognized tax benefits noted above and, as of December 31, 2011, the Company had recognized a liability for penalties and interest of $255 and $387, respectively. In 2011, the Company recognized tax benefits of ($398) and ($456) for penalties and interest, respectively, associated with the lapse of the statute of limitations.

The Company does not anticipate a significant change in unrecognized tax positions as a result of the settlement of income tax audits or lapses in the statute of limitations during the next year.

The Company is subject to taxation in the U.S. and various state, local and foreign jurisdictions. The Company’s tax years for 2009 to present are subject to examination by the taxing authorities. The Company is currently under examination by the IRS for tax years 2009 and 2010, as well as by New York City for tax years 2008 and 2009. With a few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxing authorities for years before 2009.