Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Income Before Provision for Income Taxes

“Income (loss) before provision for income taxes” as shown in the accompanying Consolidated Statements of Income (Loss) is comprised of the following (in thousands):


	Year Ended December 31,
	2022		2021		2020
Domestic	$	(25,443)	$	(53,152)	$	15,515
Foreign		43,571		30,991		14,193
Total	$	18,128	$	(22,161)	$	29,708

Schedule of Components of Provision for Income Taxes

Components of the “Provision for income taxes” in the accompanying Consolidated Statements of Income (Loss) consist of the following (in thousands):


	Year Ended December 31,
	2022		2021		2020
Current
Federal	$	696	$	798	$	2,265
Foreign		6,856		3,556		4,418
State and local		2		633		580
Total current expense		7,554		4,987		7,263
Deferred expense
Federal		1,039		(840)		1,288
Foreign		(1,522)		(752)		351
State and local		300		(936)		260
Total deferred expense		(183)		(2,528)		1,899
Provision for income taxes	$	7,371	$	2,459	$	9,162

Schedule of Reconciliation of U.S. Statutory Income Tax Rate to Company's Effective Tax Rate


	Year Ended December 31,
	2022			2021			2020
U.S. statutory tax rate		21.0	%		21.0	%		21.0	%
State and local taxes, net of federal benefit		2.7			3.1			3.1
Income attributable to non-controlling interests ^(a)		(9.3)			(9.3)			(9.9)
Subtotal		14.4	%		14.8	%		14.2	%
Non-creditable foreign and domestic taxes - non-controlling interest ^(b)(c)		14.0			(7.0)			5.1
Non-creditable foreign taxes - RE/MAX Holdings ^(c)(d)		8.1			(3.7)			2.1
Foreign derived intangible income deduction ^(c)		—			4.4			(3.1)
Other permanent differences		4.3			(1.2)			2.0
Uncertain tax positions		—			6.1			1.9
Loss on contract settlement ^(e)		—			(26.7)			—
Adjustments to state taxes ^(f)		—			3.9			—
162(m) compensation limitation		1.1			(1.8)			—
Conversions of acquired C-Corporations to pass-through entities ^(g)		—			—			8.4
Other		(1.2)			0.1			0.2
		40.7	%		(11.1)	%		30.8	%

(a)	Given the majority of the Company’s income is generated via a pass-through entity of which the non-controlling interest owns approximately 40%, that proportion of the Company’s income is not subject to U.S. or state income tax rates.

(b)	Approximately 40% of foreign taxes paid at the RMCO level and corporate subsidiary taxes are attributable to the non-controlling interest. As a result, these taxes are not creditable against the U.S. taxes of Holdings.

(c)	The percentage impact of these items in 2021 switched directionally because the Company’s pre-tax net income changed from positive to negative in 2020 while the underlying tax or deduction was relatively unchanged.

(d)	While a portion of foreign taxes are creditable within the U.S., most of the taxes paid in Canada are not creditable.

(e)	Loss on contract settlement is a result of the acquisition of INTEGRA and is not recognized for US income tax purposes.

(f)	As a result of the acquisition of INTEGRA, the state filing footprint of RE/MAX has changed which has modified the blended state rate and resulted in a small remeasurement of net deferred tax assets in 2021.

(g)	In 2020, the Company converted wemlo and First from C Corporations to flow-through entities, which triggered taxable gains. These conversions are expected to provide long-term tax benefits, both additional amortization and avoiding double taxation on profits.

Summary of Deferred Tax Assets and Liabilities

These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):


	As of December 31,
	2022		2021
Long-term deferred tax assets
Goodwill, other intangibles and other assets	$	36,027	$	39,531
Imputed interest deduction pursuant to tax receivable agreements		1,960		2,241
Operating lease liabilities		2,728		2,362
Compensation and benefits ^(a)		4,703		5,904
Allowance for doubtful accounts		1,272		1,167
Contingent consideration liability		651		839
Deferred revenue		3,885		3,953
Foreign tax credit carryforward		9,077		4,510
Net operating loss carryforward ^(b)		83		653
163j business interest limitation carryforward		479		—
Other		1,387		1,034
Total long-term deferred tax assets		62,252		62,194
Valuation allowance^(c)		(9,071)		(7,671)
Total long-term deferred tax assets, net of valuation allowance		53,181		54,523
Long-term deferred tax liabilities
Property and equipment and other long lived assets		(281)		(1,239)
Goodwill, other intangibles and other assets ^(a)		(13,768)		(15,499)
Other		(804)		(1,170)
Total long-term deferred tax liabilities		(14,853)		(17,908)
Net long-term deferred tax assets		38,328		36,615
Total deferred tax assets and liabilities	$	38,328	$	36,615

(a)	Amounts include deferred tax liabilities related to the acquisition of INTEGRA’s U.S. and Canadian subsidiaries.

(b)	Net operating loss for the Company’s Canadian subsidiary.

(c)	Includes a valuation allowance on deferred tax assets for goodwill and other intangibles in the Company’s Western Canada operations, as well as foreign tax credit carryforwards.

Schedule of unrecognized tax benefits

Uncertain tax position liabilities represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the consolidated financial statements and are recognized in “Income taxes payable” in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount, excluding interest and penalties is as follows:


	As of December 31,
	2022		2021
Balance, January 1	$	1,587	$	5,300
Increases related to prior period tax positions		—		96
Decrease related to prior year tax positions		(882)		(815)
Increase related to tax positions from acquired companies		309		1,587
Settlements		—		(4,944)
Foreign currency transaction (gains) losses		—		363
Balance, December 31	$	1,014	$	1,587

(a)	Excludes accrued interest and penalties of $0.3 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively. These related interest and penalties are recognized in “Income taxes payable” within the Consolidated Balance Sheets.