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INCOME TAXES
6 Months Ended
Jun. 30, 2014
INCOME TAXES  
INCOME TAXES

15.                     INCOME TAXES

 

Prior to February 11, 2014, the Company had not been subject to U.S. federal income taxes as the predecessor entity is a Limited Liability limited partnership (“LLLP”), but had been subject to the New York City Unincorporated Business Tax (“NYC UBT”).  As a result of the IPO, a portion of the Company’s income is subject to U.S. federal, state and local income taxes and taxed at the prevailing corporate tax rates.

 

Components of the provision for income taxes consist of the following:

 

 

 

Three Months
Ended
June 30, 2014

 

Six Months Ended
June 30, 2014

 

Current expense

 

 

 

 

 

Federal

 

$

10,452,799

 

$

15,819,774

 

State and local

 

2,957,292

 

4,762,804

 

Total current expense

 

13,410,091

 

20,582,578

 

Deferred expense/(benefit)

 

 

 

 

 

Federal

 

(4,353,718

)

(5,875,173

)

State and local

 

(857,749

)

(1,219,564

)

Total deferred expense/(benefit)

 

(5,211,467

)

(7,094,737

)

Provision for income tax expense

 

$

8,198,624

 

$

13,487,841

 

 

Corporate taxes payable as of June 30, 2014 were $13,634,798. There were no corporate taxes payable as of December 31, 2013.  NYC UBT taxes payable at June 30, 2014 and December 31, 2013 were $412,066 and $482,324, respectively.

 

A reconciliation between the U.S. federal statutory income tax rate and the effective tax rate for the period ended June 30, 2014 is as follows:

 

 

 

Three Months
Ended June 30, 2014

 

Six Months Ended
June 30, 2014

 

 

 

 

 

 

 

US statutory tax rate

 

35.00

%

35.00

%

Increase due to state and local taxes

 

3.76

%

4.10

%

Benefit of partnership income not subject to taxation

 

-17.33

%

-17.33

%

Effective income tax rate

 

21.43

%

21.77

%

 

As of June 30, 2014, the Company’s net deferred tax assets were $7,094,737 and included in other assets in the Company’s combined consolidated balance sheets. The Company believes it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of the net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. The components of the Company’s deferred tax assets and liabilities are as follows:

 

 

 

June 30, 2014

 

Deferred Tax Assets

 

 

 

Depreciation

 

$

2,033,698

 

Equity based compensation

 

2,613,308

 

Unrealized gains and losses

 

2,447,731

 

Total Deferred Tax Assets

 

$

7,094,737

 

 

 

 

 

Deferred Tax Liabilities

 

 

 

Unrealized gains and losses

 

 

Total Deferred Tax Liabilities

 

$

 

 

 

 

 

Net Deferred Tax Assets/(Liabilities)

 

$

7,094,737

 

 

Our tax returns are subject to audit by taxing authorities. With a few minor exceptions, as of June 30, 2014 the tax years 2010, 2011 and 2012 remain open to examination by the major taxing jurisdictions in which the Company is subject to taxes.  U.S. federal and state taxing authorities are currently examining income tax returns of various subsidiaries of the Company for tax years 2010 through 2012. The Company believes that the audits will result in no material changes, however, these audits can often take a long time to complete and settle and there can be no assurances as to the possible outcomes.

 

Under U.S. GAAP, a tax benefit related to an income tax position may be recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities based on the technical merits of the position. The Company determined that no liability for unrecognized tax benefits for uncertain income tax positions was required to be recorded as of June 30, 2014. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record a significant liability for unrecognized tax benefits within the next twelve months.