Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

12. INCOME TAXES

The provision for income taxes (benefits) by taxing jurisdiction consisted of:

	Years Ended
	December 31,			December 31,			December 31,
	2021			2020			2019
	(in thousands)
Current
U.S. federal	$	133,281		$	39,665		$	31,493
U.S. state and local		49,475			29,942			6,841
Non U.S.		60,766			70,441			22,103
		243,522			140,048			60,437
Deferred
U.S. federal		(79,812	)		(44,507	)		(11,941	)
U.S. state and local		(25,981	)		(8,911	)		(4,001	)
Non U.S.		(5,576	)		(2,227	)		(4,825	)
		(111,369	)		(55,645	)		(20,767	)
Provision for income taxes	$	132,153		$	84,403		$	39,670

The following table reconciles the U.S. federal statutory income tax rate to the effective income tax rate:

	Years Ended
	December 31,			December 31,			December 31,
	2021			2020			2019
U.S. federal statutory income tax rate		21.00	%		21.00	%		21.00	%
U.S. state and local income taxes, net of U.S.    federal income tax benefits		2.90	%		3.14	%		2.51	%
Change in tax rates applicable to non-U.S.    earnings		(5.09	%)		(3.30	%)		(3.74	%)
Foreign Derived Intangible Income (FDII),   net of GILTI (1)		(1.09	%)		(3.84	%)		1.05	%
Domestic tax credits and incentives		(0.59	%)		(0.59	%)		(0.31	%)
Valuation allowance		—	%		—	%		(0.10	%)
Excess share-based compensation		(2.65	%)		(3.24	%)		(13.94	%)
Other		0.92	%		(0.87	%)		0.11	%
Effective income tax rate		15.40	%		12.30	%		6.58	%

⁽¹⁾ The year ended December 31, 2020 includes (3.00%) released during the year related to the favorable impact on prior years from final regulations clarifying certain provisions of the Tax Cuts and Jobs Act (“Tax Reform”).

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020, were as follows:

	As of
	December 31,			December 31,
	2021			2020
	(in thousands)
Deferred tax assets:
Capitalized expenses	$	94,265		$	—
Unearned revenue		56,810			46,530
Lease liabilities		39,507			40,786
Employee compensation and benefit plans		20,216			20,602
Interest expense carryforwards		11,215			7,901
Loss carryforwards		18,173			3,071
Pension		2,229			3,066
Other		3,509			—
Subtotal		245,924			121,956
Less: valuation allowance		(36	)		—
Total deferred tax assets	$	245,888		$	121,956
Deferred tax liabilities:
Intangible assets	$	(147,118	)	$	(51,862	)
Right of use assets		(32,106	)		(35,634	)
Property, equipment and leasehold    improvements, net		(27,136	)		(20,197	)
Unremitted foreign earnings		(3,059	)		(1,279	)
Unearned revenue		—			—
Other		—			(2,131	)
Total deferred tax liabilities	$	(209,419	)	$	(111,103	)
Net deferred tax assets	$	36,469		$	10,853

As presented in the table above, the Company has certain loss and interest carryforward items. The tax value of the U.S. portion of the interest carryforward was zero and $0.7 million as of December 31, 2021 and December 31, 2020, respectively. The tax value of the non-U.S. portion of the interest carryforward was $11.2 million and $7.2 million as of December 31, 2021 and December 31, 2020, respectively.  These carryforwards are subject to annual limitations on utilization over an indefinite life.

Net operating loss carryforwards in the U.S. were $69.7 million with a tax value of $17.9 million and $8.7 million with a tax value of $1.8 million as of December 31, 2021 and December 31, 2020, respectively. The increase in the net operating loss carryforward in the U.S. is primarily attributable to the September 13, 2021 acquisition of RCA. These carryforwards are subject to annual limitations and will begin to expire in 2026. The tax value of the non-U.S. portion of the net operating loss was $0.3 million and $1.2 million as of December 31, 2021 and December 31, 2020 respectively. These carryforwards are subject to annual limitations and will begin to expire in 2023.

The Company believes the majority of the deferred tax assets at December 31, 2021 are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which it operates with the exception of a loss carryforward in one jurisdiction where it has established a valuation allowance of $0.04 million.

As of December 31, 2021, the Company has recorded prepayments of taxes in the amount of $36.5 million in “Other non-current assets” on the Consolidated Statements of Financial Condition, as the amounts are not anticipated to be received until after December 31, 2022.      

The following table presents changes in the Company’s deferred tax asset valuation allowance for the periods indicated:

	Years Ended
	December 31,		December 31,		December 31,
	2021		2020		2019
	(in thousands)
Beginning balance	$	—	$	—	$	632
Additions charged to cost and expenses		36		—		—
Deductions		—		—		(632	)
Ending balance	$	36	$	—	$	—

The following table presents the components of income before provision for income taxes generated by domestic or foreign operations for the periods indicated:

	Years Ended
	December 31,		December 31,		December 31,
	2021		2020		2019
	(in thousands)
Domestic	$	417,679	$	353,049	$	351,177
Foreign (1)		440,457		333,176		252,141
Total income before provision for income taxes	$	858,136	$	686,225	$	603,318

⁽¹⁾ Foreign income before provision for income taxes is defined as income generated from operations located outside the U.S., which includes income from foreign branches of U.S. companies.

As of December 31, 2021, the Company has provided for applicable state income and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries.

The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions in which it files income tax returns. The Company has established unrecognized tax benefits that the Company believes are adequate in relation to the potential for additional assessments. Once established, the Company adjusts unrecognized tax benefits only when more information is available or when an event occurs necessitating a change. Based on the current status of income tax audits, the Company believes it is reasonably possible that the total amount of unrecognized benefits may decrease by approximately $31.6 million in the next twelve months as a result of the resolution of tax examinations.

The Company believes the resolution of tax matters will not have a material effect on the Consolidated Statement of Financial Condition of the Company, although a resolution could have a material impact on the Company’s Consolidated Statement of Income for a particular future period and on the Company’s effective tax rate for any period in which such resolution occurs.

The following table presents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2021, 2020 and 2019:

	Years Ended
Gross unrecognized tax benefits	December 31,			December 31,			December 31,
(in thousands)	2021			2020			2019
Beginning balance	$	16,621		$	15,841		$	14,091
Increases based on tax positions related to the    current period		511			292			2,413
Increases based on tax positions related to    prior periods		20,321			2,099			—
Decreases based on tax positions related to    prior periods		—			—			—
Decreases related to settlements    with taxing authorities		—			—			—
Decreases related to a lapse of    applicable statute of limitations		(4,414	)		(1,611	)		(663	)
Ending balance	$	33,039		$	16,621		$	15,841

The total amount of unrecognized tax benefits was $33.0 million, $16.6 million and $15.8 million as of December 31, 2021, 2020 and 2019, respectively, which, if recognized, would favorably affect the effective tax rate in future periods. The increase in unrecognized tax benefits in the year ended December 31, 2021 is principally due to the filing of prior year refund claims. The Company recognizes the accrual of interest and penalties related to unrecognized tax benefits in the “Provision for income taxes” in the Consolidated Statement of Income. For the years ended December 31, 2021 and 2020, the Company recognized zero and for the year ended December 31, 2019, the Company recognized $0.4 million of interest in the Consolidated Statement of Income with respect to unrecognized tax benefits. Penalties of $0.3 million, $0.4 million and zero were recognized in the Consolidated Statement of Income and the Consolidated Statement of Financial Position for the years ended December 31, 2021, 2020 and 2019, respectively. The amount of accrued interest, which includes interest related to uncertain tax positions and accrued income tax expense, recorded on the Consolidated Statement of Financial Condition as of December 31, 2021, 2020 and 2019 was $0.9 million.

The Company is under examination by tax authorities in certain jurisdictions, including foreign jurisdictions, such as the United Kingdom, Switzerland and India, and states in the U.S. in which the Company has significant operations, such as New York and California. The tax years currently under examination vary by jurisdiction but include years ranging from 2008 through 2020.