Income Taxes

12 Months Ended

Dec. 31, 2019

As a result of the Company's formation and initial public offering, collectively referred to as 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, 2019 and 2018 were $3,400 and $33,621, respectively.

On December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available or computed analysis in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The Company recognized a provisional tax impact related to the re-measurement of net deferred tax assets, the write down of other comprehensive income related to certain foreign subsidiaries, the valuation allowance and effects of the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries within its consolidated financial statements for the year ended December 31, 2017. During 2018, the Company finalized the provisional tax impact.

Additionally, the Company expects to recognize the income tax effects associated with the new global intangible low-taxed income ("GILTI") provisions in the period incurred. For the years ended December 31, 2019 and 2018, no additional income tax expense associated with the GILTI provisions has been reported and it is not expected to be material to the Company’s effective tax rate for the year.

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



	For the Years Ended December 31,
	2019		2018		2017
U.S.	$	359,496	$	449,171	$	379,407
Non-U.S.	32,986		36,589		4,489
Income before Income Tax Expense^(a)	$	392,482	$	485,760	$	383,896


(a)	Net of Noncontrolling Interest.

The components of the provision for income taxes reflected on the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 consist of:



	For the Years Ended December 31,
	2019			2018			2017
Current:
Federal	$	72,712		$	80,690		$	85,371
Foreign	6,134			7,360			9,796
State and Local	26,703			24,451			14,955
Total Current	105,549			112,501			110,122
Deferred:
Federal	(2,169		)	(4,771		)	150,800
Foreign	(5,022		)	(61		)	(3,464		)
State and Local	(3,312		)	851			984
Total Deferred	(10,503		)	(3,981		)	148,320
Total	$	95,046		$	108,520		$	258,442

A reconciliation between the federal statutory income tax rate and the Company's effective income tax rate for the years ended December 31, 2019, 2018 and 2017 is as follows:



	For the Years Ended December 31,
	2019		2018		2017
Reconciliation of Federal Statutory Tax Rates:
U.S. Statutory Tax Rate	21.0	%	21.0	%	35.0	%
Increase Due to State and Local Taxes	4.2	%	3.6	%	3.1	%
Rate Benefits as a Limited Liability Company/Flow Through	(2.5	)%	(2.6	)%	(2.3	)%
Foreign Taxes	(0.1	)%	0.2	%	(1.1	)%
Non-Deductible Expenses⁽¹⁾	1.6	%	1.2	%	1.6	%
ASU 2016-09 Benefit for Stock Compensation	(2.7	)%	(4.2	)%	(5.5	)%
Tax Cuts and Jobs Act - Reduction to Tax Receivable Agreement Liability	—	%	—	%	(5.6	)%
Tax Cuts and Jobs Act - Primarily Related to the Re-measurement of Net Deferred Tax Assets	—	%	0.1	%	32.7	%
Valuation Allowances	0.3	%	0.3	%	1.1	%
Other Adjustments	(0.6	)%	0.1	%	0.1	%
Effective Income Tax Rate	21.2	%	19.7	%	59.1	%


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

In conjunction with the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which reduced income tax rates in the U.S. in 2018 and in future years, the Company's tax provision for 2017 includes a charge of $143,261, resulting from the estimated re-measurement of net deferred tax assets, which relates principally to temporary differences between book and tax, primarily related to the step-up in basis associated with the exchange of partnership units, deferred compensation, amortization of goodwill and intangible assets and depreciation of fixed assets and leasehold improvements, as well as the write-down of foreign

currency related deferred tax assets. This charge, as well as the reduction in the liability for amounts due pursuant to the Company's tax receivable agreement, resulted in an increase in the effective tax rate of 27.1 percentage points for 2017. During 2018, the Company finalized the provisional tax impact of the Tax Cuts and Jobs Act resulting in an additional charge of $399, primarily related to the re-measurement of net deferred tax assets. In conjunction with the enactment of the Tax Cuts and Jobs Act, the Company's effective tax rate for the year ended December 31, 2018 was reduced by 12.3 percentage points, before the impact of ASU 2016-09. The effective tax rate for the years ended December 31, 2019, 2018 and 2017 also reflects the application of ASU 2016-09, which was adopted effective January 1, 2017. ASU 2016-09 requires that the tax deduction associated with the appreciation or depreciation in the Company's share price upon vesting of employee share-based awards above or below the original grant price be reflected in income tax expense. The effective tax rate reflects net excess tax benefits associated with the appreciation or depreciation in the Company's share price upon vesting of employee share-based awards above or below the original grant price of $12,229, $23,350 and $24,003 being recognized in the Company's Provision for Income Taxes for the years ended December 31, 2019, 2018, and 2017, respectively, and resulted in a reduction in the effective tax rate of 2.7, 4.2 and 5.5 percentage points for the years ended December 31, 2019, 2018 and 2017, respectively. The effective tax rate for 2019, 2018 and 2017 also reflects the effect of certain nondeductible expenses, including expenses related to Class E and J LP Units and Class I-P and K-P Units and Class G and H LP Interests, as well as the noncontrolling interest associated with LP Units and other adjustments.

Due to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the previous undistributed earnings of certain foreign subsidiaries are subject to a mandatory deemed repatriation tax. Income taxes paid or payable to foreign jurisdictions partially reduce the repatriation tax as a foreign tax credit, based on a formula that includes earnings of certain foreign subsidiaries. The Company has computed the repatriation tax and determined that it should have sufficient foreign tax credits to offset the estimated charge; any additional liability would be immaterial.

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, 2019 and 2018 were as follows:



	December 31,
	2019			2018
Deferred Tax Assets:
Depreciation and Amortization	$	37,912		$	33,738
Compensation and Benefits	85,567			61,541
Step up in tax basis due to the exchange of LP Units for Class A Shares⁽¹⁾	99,979			111,108
Step up in tax basis due to the exchange of LP Units for Class A Shares⁽²⁾	41,286			37,079
Operating Lease⁽³⁾	58,497			—
Other	20,617			24,720
Total Deferred Tax Assets	$	343,858		$	268,186
Deferred Tax Liabilities:
Operating Lease⁽³⁾	$	46,682		$	—
Goodwill, Intangible Assets and Other	19,012			18,873
Total Deferred Tax Liabilities	$	65,694		$	18,873
Net Deferred Tax Assets Before Valuation Allowance	278,164			249,313
Valuation Allowance	(9,573		)	(8,221		)
Net Deferred Tax Assets	$	268,591		$	241,092


(1)	Step-up in the tax basis associated with the exchange of LP Units for holders which have a tax receivable agreement.


(2)	Step-up in the tax basis associated with the exchange of LP Units for holders which do not have a tax receivable agreement.


(3)	As discussed in Note 3, in 2019, the Company adopted ASU 2016-02 using the modified retrospective approach as of the date of adoption, which resulted in the recognition of operating lease right-of-use assets and lease liabilities.

The $27,499 increase in net deferred tax assets from December 31, 2018 to December 31, 2019 was primarily attributable to the net $21,278 increase in compensation and benefits, depreciation and amortization, as well as the step-up in basis of the tangible and intangible assets of Evercore LP, as discussed below.

During 2019, the LP holders exchanged 353 Class A and Class E LP Units for Class A Shares, which resulted in an increase in the tax basis of the tangible and intangible assets of Evercore LP. The exchange of Class E and certain Class A LP Units resulted in a $7,352 step-up in the tax basis of the tangible and intangible assets of Evercore LP and a corresponding increase to Additional Paid-In-Capital on the Company's Consolidated Statement of Financial Condition as of December 31, 2019. Further, there were no exchanges of such Class A LP Units under the tax receivable agreement that was entered into in 2006 between the Company and the LP Unit holders for the year ended December 31, 2019. See Note 16 for further discussion.

The Company reported an increase in deferred tax assets of $173 associated with changes in Unrealized Gain (Loss) on Investment Securities and a decrease of $1,306 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2019. The Company reported an increase in deferred tax assets of $86 associated with changes in Unrealized Gain (Loss) on Investment Securities and an increase of $439 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2018.

The Company's affiliates generated approximately $6,884 of NYC unincorporated business tax credit carryforwards; a portion were set to expire in the 2019 tax year. Management has weighed both the positive and negative evidence and determined that it was appropriate to establish a valuation allowance of $4,600, 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, 2019, 2018 and 2017 is as follows:



	December 31,
	2019			2018		2017
Beginning unrecognized tax benefit	$	—		$	—	$	—
Additions for tax positions of prior years	616			—		—
Reductions for tax positions of prior years	—			—		—
Lapse of Statute of Limitations	(122		)	—		—
Decrease due to settlement with Taxing Authority	—			—		—
Ending unrecognized tax benefit	$	494		$	—	$	—

The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Consolidated Statements of Operations. As of December 31, 2019, there were $494 of unrecognized tax benefits that, if recognized, $402 would affect the effective tax rate. 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 accrued interest and penalties of $216 and $13, respectively, during the year ended December 31, 2019. In 2019, the Company recognized tax benefits of ($41) and ($3) of interest and penalties, respectively, associated with the lapse of the statute of limitations. The Company had no unrecognized tax benefits from January 1, 2017 through December 31, 2018.

The Company is subject to taxation in the U.S. and various state, local and foreign jurisdictions. The Company and its affiliates are currently under examination by New York City for tax years 2014 through 2016 and New York State for tax years 2013 through 2015. 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 2014.