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, 2014 and 2013 were $2,515 and $4,713, respectively.

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



	For the Years Ended December 31,
	2014		2013		2012
U.S.	$	124,747	$	89,821	$	45,226
Non-U.S.	30,883		28,735		14,571
Income before Income Tax Expense (a)	$	155,630	$	118,556	$	59,797


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

The components of the provision for income taxes from continuing operations reflected on the Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 consist of:



	For the Years Ended December 31,
	2014			2013		2012
Current:
Federal	$	33,814		$	24,607	$	24,956
Foreign	10,513			11,982		6,007
State and Local	10,114			7,541		7,912
Total Current	54,441			44,130		38,875
Deferred:
Federal	15,104			5,992		(2,458		)
Foreign	(3,080		)	4,733		(4,756		)
State and Local	2,291			8,834		(753		)
Total Deferred	14,315			19,559		(7,967		)
Total	$	68,756		$	63,689	$	30,908

A reconciliation between the federal statutory income tax rate from continuing operations and the Company’s effective income tax rate for the years ended December 31, 2014, 2013 and 2012 is as follows:



	For the Years Ended December 31,
	2014		2013		2012
Reconciliation of Federal Statutory Tax Rates:
U.S. Statutory Tax Rate	35.0	%	35.0	%	35.0	%
Increase Due to State and Local Taxes	6.0	%	5.3	%	6.8	%
Rate Benefits as a Limited Liability Company/Flow Through	(4.2	)%	(7.0	)%	(6.9	)%
Foreign Taxes	0.4	%	3.2	%	2.2	%
Non-Deductible Expenses (1)	1.1	%	3.4	%	9.4	%
Valuation Allowances	0.9	%	—	%	(2.0	)%
Write Down of Deferred Tax Asset	—	%	6.8	%	1.6	%
Other Adjustments	(0.2	)%	(0.7	)%	(2.2	)%
Effective Income Tax Rate	39.0	%	46.0	%	43.9	%


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

Undistributed earnings of certain foreign subsidiaries totaled approximately $4,719 as of December 31, 2014. 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, 2014, unrecognized net deferred tax liability attributable to those reinvested earnings would have aggregated approximately $1,437. 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, 2014 and 2013 were as follows:



	December 31,
	2014			2013
Current Deferred Tax Assets:
Step up in tax basis due to the exchange of LP Units for Class A Shares	$	13,096		$	11,271
Total Current Deferred Tax Asset	$	13,096		$	11,271
Long-term Deferred Tax Assets:
Depreciation and Amortization	$	25,978		$	20,604
Compensation and Benefits	32,535			31,735
Step up in tax basis due to the exchange of LP Units for Class A Shares	208,970			192,811
Other	27,419			21,396
Total Long-term Deferred Tax Assets	$	294,902		$	266,546
Long-term Deferred Tax Liabilities:
Goodwill, Intangible Assets and Other	$	27,396		$	14,933
Total Long-term Deferred Tax Liabilities	$	27,396		$	14,933
Net Long-term Deferred Tax Assets Before Valuation Allowance	$	267,506		$	251,613
Valuation Allowance	(1,605		)	—
Net Long-term Deferred Tax Assets	$	265,901		$	251,613

The increase in net deferred tax assets from December 31, 2013 to December 31, 2014 was primarily attributable to an increase in the tax basis of the tangible and intangible assets of Evercore LP, which resulted from the 2014 LP Unit exchanges. During 2014, the LP holders exchanged 1,162 Class A LP Units for Class A Shares, which resulted in an increase in the tax basis of the tangible and intangible assets of Evercore LP. Further, the exchange of 1,162 of such Class A LP Units 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 $31,200, $26,520 and $4,680, respectively, on the Company’s Consolidated Statement of Financial Condition as of December 31, 2014. See Note 14 for further discussion.

Additionally, the increase in net deferred tax assets from December 31, 2013 to December 31, 2014 was also attributable to an increase of $5,374 related to the depreciation of fixed assets and amortization of intangible assets.

There was a net increase of $12,463 in the deferred tax liabilities from December 31, 2013 to December 31, 2014, primarily related to the identified intangible assets acquired in the ISI acquisition. The acquisition was structured as a tax-free exchange under Internal Revenue Code Section 721 and therefore no tax basis step-up was reported in the acquired assets.

The Company reported an increase in deferred tax assets of $1,072 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $5,129 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2014. The Company reported an increase in deferred tax assets of $182 associated with changes in Unrealized Gain (Loss) on Marketable Securities and a decrease of $307 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2013.

The Company’s net operating loss and tax credit carryforwards primarily relate to loss carryforwards from the UK, which were fully utilized at December 31, 2014. The Company's affiliates generated approximately $5,054 of NYC unincorporated business tax credit carryforwards, which are set to expire in 2017. Management has weighed both the positive and negative evidence and determined that it was appropriate to establish a valuation allowance of $1,605 on the amount of credits that are not expected to be realized.

A reconciliation of the changes in tax positions for the years ended December 31, 2014, 2013 and 2012 is as follows:



	December 31,
	2014			2013		2012
Beginning unrecognized tax benefit	$	624		$	98	$	1,109
Additions for tax positions of prior years	276			526		—
Reductions for tax positions of prior years	—			—		—
Lapse of Statute of Limitations	(98		)	—		(1,011		)
Decrease due to settlement with Taxing Authority	(802		)	—		—
Ending unrecognized tax benefit	$	—		$	624	$	98

The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Consolidated Statements of Operations. Related to the unrecognized tax benefits, the Company recognized $191 of interest and penalties during the year ended December 31, 2014, prior to the settlement of the NYC UBT audit. The Company has $229 accrued for the payment of interest and penalties as of December 31, 2014, prior to the settlement of the audit. The Company recognized $166 of interest and penalties during the year ended December 31, 2013. The Company has $215 accrued for the payment of interest and penalties as of December 31, 2013.

The Company is subject to taxation in the U.S. and various state, local and foreign jurisdictions. The Company’s tax years for 2011 to present are subject to examination by the taxing authorities. The Company is currently under examination by New York City for tax years 2011 through 2013. 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 2011.