Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

24. Income Taxes

The components of income tax expense for 2023, 2022 and 2021, are as follows:

(in millions)	2023		2022			2021
Current income tax expense:
Federal	$	641	$	255		$	2,031
State and local		176		(9	)		226
Foreign		538		448			576
Total net current income tax expense		1,355		694			2,833
Deferred income tax expense (benefit):
Federal		101		562			(935	)
State and local		11		64			(150	)
Foreign		12		(24	)		220
Total net deferred income tax expense (benefit)		124		602			(865	)
Total income tax expense	$	1,479	$	1,296		$	1,968

Income tax expense has been based on the following components of income before taxes, less net income (loss) attributable to NCI:

(in millions)	2023		2022		2021
Domestic	$	4,565	$	4,604	$	5,030
Foreign		2,416		1,870		2,839
Total	$	6,981	$	6,474	$	7,869

The foreign income before taxes includes countries that have statutory tax rates that are different than the US federal statutory tax rate of 21%, such as the UK, Canada, Germany and Ireland.

A reconciliation of income tax expense with expected federal income tax expense computed at the applicable federal income tax rate of 21% for 2023, 2022 and 2021 is as follows:

(in millions)	2023					2022					2021
Statutory income tax expense	$	1,466		21	%	$	1,360		21	%	$	1,653		21	%
Increase (decrease) in income taxes resulting from:
State and local taxes (net of federal benefit)		110		2			115		2			121		2
Impact of federal, foreign, state, and local tax rate    changes on deferred taxes		—		—			(25	)	—			125		2
Stock-based compensation awards		(41	)	(1	)		(87	)	(1	)		(43	)	(1	)
Resolution of outstanding tax matters		(204	)	(3	)		(143	)	(2	)		—		—
Effect of foreign tax rates		112		2			23		—			32		—
Other		36		—			53		—			80		1
Income tax expense	$	1,479		21	%	$	1,296		20	%	$	1,968		25	%

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 financial statements. These temporary differences result in taxable or deductible amounts in future years.

The components of deferred income tax assets and liabilities are shown below:

	December 31,
(in millions)	2023			2022
Deferred income tax assets:
Compensation and benefits	$	375		$	568
Loss carryforwards		95			100
Capitalized costs		216			103
Other		825			903
Gross deferred tax assets		1,511			1,674
Less: deferred tax valuation allowances		(59	)		(39	)
Deferred tax assets net of valuation allowances		1,452			1,635
Deferred income tax liabilities:
Goodwill and acquired indefinite-lived intangibles		4,299			4,244
Acquired finite-lived intangibles		86			114
Unrealized investment gains		25			72
Other		340			349
Gross deferred tax liabilities		4,750			4,779
Net deferred tax (liabilities)	$	(3,298	)	$	(3,144	)

Deferred income tax assets and liabilities are recorded net when related to the same tax jurisdiction. At December 31, 2023, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $208 million and $3.5 billion, respectively. At December 31, 2022, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $237 million and $3.4 billion, respectively.

Income tax expense for 2023 included $242 million discrete tax net benefits related to the resolution of certain outstanding tax matters and stock-based compensation awards that vested in 2023. Income tax expense for 2022 included $235 million of net discrete tax benefits primarily related to stock-based compensation awards that vested in 2022 and the resolution of certain outstanding tax matters, and $35 million of net noncash tax benefits related to the revaluation of certain deferred income tax liabilities.

At December 31, 2023 and 2022, the Company had available state net operating loss carryforwards of $2.7 billion and $2.5 billion, respectively, which will begin to expire in 2024. At December 31, 2023 and 2022, the Company had foreign net operating loss carryforwards of $164 million and $179 million, respectively, of which $5 million will begin to expire in 2024.

At December 31, 2023 and 2022, the Company had $59 million and $39 million of valuation allowances for deferred income tax assets, respectively, recorded on the consolidated statements of financial condition.

Current income taxes are recorded net on the consolidated statements of financial condition when related to the same tax jurisdiction. At December 31, 2023, the Company had current income taxes receivable and payable of $252 million and $85 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively. At December 31, 2022, the Company had current income taxes receivable and payable of $354 million and $92 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively.

The following tabular reconciliation presents the total amounts of gross unrecognized tax benefits:

(in millions)	2023			2022			2021
Balance at January 1	$	912		$	1,022		$	940
Additions for tax positions of prior years		25			13			18
Reductions for tax positions of prior years		(22	)		(75	)		(4	)
Additions based on tax positions related to current year		49			55			69
Additions related to business combinations		16			—			—
Settlements		(231	)		(103	)		(1	)
Balance at December 31	$	749		$	912		$	1,022

Included in the balance of unrecognized tax benefits at December 31, 2023, 2022 and 2021, respectively, are $505 million, $497 million and $616 million of tax benefits that, if recognized, would affect the effective tax rate.

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued interest and penalties of $(20) million during 2023 and in total, as of December 31, 2023, had recognized a liability for interest and penalties of $140 million. The Company accrued interest and penalties of $(40) million during 2022 and in total, as of December 31, 2022, had recognized a liability for interest and penalties of $160 million. The Company accrued interest and penalties of $36 million during 2021 and in total, as of December 31, 2021, had recognized a liability for interest and penalties of $200 million.

BlackRock is subject to US federal income tax, state and local income tax, and foreign income tax in multiple jurisdictions. Tax years after 2015 remain open to US federal income tax examination.

During 2014 and 2019, the Internal Revenue Service commenced its examination of BlackRock’s 2012 through 2015 tax years, for which the examination was concluded in 2023. During 2020 and 2021, the Internal Revenue Service commenced its examination of BlackRock’s 2017 through 2018 tax years and 2019 tax year, respectively. During 2023, the Internal Revenue Service commenced its examination of BlackRock’s 2016 tax year.

The Company is currently under audit in several state and local jurisdictions. The significant state and local income tax examinations are in New York State for tax years 2012 through 2020, for which 2012 through 2014 examination was concluded during 2023, and New York City for tax years 2012 through 2014. No open state and local tax examinations cover years earlier than 2012.

Upon conclusion of its examination, Her Majesty’s Revenue and Customs (“HMRC”) issued a closure notice during 2017 for various UK BlackRock subsidiaries for tax years 2009 and years after. At that time, the Company decided to pursue litigation for the tax matters included on such notice. During 2020, the Company received a favorable decision from the First Tier Tribunal (“FTT”), however, HMRC appealed to the Upper Tribunal (“UT”) and the UT ruled in HMRC’s favor, overturning the FTT’s decision in July 2022. BlackRock appealed UT’s decision to the UK Court of Appeal (“CoA”) and the appeal hearing is scheduled for March 2024. BlackRock does not expect the ultimate resolution to result in a material impact to the consolidated financial statements.

From time to time, BlackRock may receive or be subject to tax authorities’ assessments and challenges related to income taxes. BlackRock does not currently expect the ultimate resolution of any other existing matters to be material to the consolidated financial statements.

At December 31, 2023, it is reasonably possible the total amounts of unrecognized tax benefits will change within the next twelve months due to completion of tax authorities’ exams or the expiration of statues of limitations. Management estimates that the existing liability for uncertain tax positions could decrease by approximately $65 million to $280 million within the next twelve months.