Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Taxes

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,
	2023		2022		2021
Domestic	$	(82,690)	$	(25,443)	$	(53,152)
Foreign		41,151		43,571		30,991
Total	$	(41,539)	$	18,128	$	(22,161)

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,
	2023		2022		2021
Current
Federal	$	1,748	$	696	$	798
Foreign		5,248		6,856		3,556
State and local		564		2		633
Total current expense		7,560		7,554		4,987
Deferred expense
Federal		39,634		1,039		(840)
Foreign		573		(1,522)		(752)
State and local		9,180		300		(936)
Total deferred expense		49,387		(183)		(2,528)
Provision for income taxes	$	56,947	$	7,371	$	2,459

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

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2023			2022			2021
U.S. statutory tax rate		21.0	%		21.0	%		21.0	%
State and local taxes, net of federal benefit		3.7			2.7			3.1
Income attributable to non-controlling interests (a)		(16.3)			(9.3)			(9.3)
Subtotal		8.4	%		14.4	%		14.8	%
Non-creditable foreign and domestic taxes - non-controlling interest (b)(c)		(4.6)			14.0			(7.0)
Non-creditable foreign taxes - RE/MAX Holdings (c)(d)		(0.5)			8.1			(3.7)
Foreign derived intangible income deduction (c)		—			—			4.4
Other permanent differences		(3.4)			4.3			(1.2)
Uncertain tax positions		2.4			—			6.1
Loss on contract settlement (e)		—			—			(26.7)
Adjustments to state taxes (f)		—			—			3.9
162(m) compensation limitation		—			1.1			(1.8)
Valuation Allowance		(153.1)			—			—
Effect of permanent difference - reduction in TRA liability		15.0			—			—
Other		(1.3)			(1.2)			0.1
		(137.1)	%		40.7	%		(11.1)	%

(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 2023 and 2021 switched directionally because the Company’s pre-tax net income changed from positive to negative.

(d) While a portion of foreign taxes are creditable within the U.S. since Canada’s tax rate is higher than the U.S. statutory rate a portion of the tax paid will not be 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.

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,
	2023		2022
Long-term deferred tax assets
Goodwill, other intangibles and other assets	$	33,897	$	36,027
Settlement charge		4,011		—
Imputed interest deduction pursuant to tax receivable agreements		2,175		1,960
Operating lease liabilities		5,554		6,559
Compensation and benefits		4,414		4,703
Allowance for doubtful accounts		1,401		1,272
Contingent consideration liability		396		651
Deferred revenue		3,952		3,885
Foreign tax credit carryforward		11,358		9,077
Net operating loss carryforward		2,980		83
163j business interest limitation carryforward		5,536		479
Other		2,161		1,387
Total long-term deferred tax assets		77,835		66,083
Valuation allowance (a)		(72,849)		(9,071)
Total long-term deferred tax assets, net of valuation allowance		4,986		57,012
Long-term deferred tax liabilities
Property and equipment and other long lived assets		(27)		(281)
Goodwill, other intangibles and other assets		(12,543)		(13,768)
Operating lease assets		(3,109)		(3,831)
Other		(104)		(804)
Total long-term deferred tax liabilities		(15,783)		(18,684)
Net deferred tax assets and liabilities	$	(10,797)	$	38,328

(a) In 2023, a full valuation allowance was recorded against the Company’s remaining deferred tax assets as a result of a combined three-year cumulative loss primarily due to the settlement of the industry class-action lawsuits.

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,
	2023		2022
Balance, January 1	$	1,014	$	1,587
Decrease related to prior year tax positions		(756)		(882)
Increase related to tax positions from acquired companies		—		309
Balance, December 31	$	258	$	1,014

(a) Excludes accrued interest and penalties of $0.1 million and $0.3 million for the years ended December 31, 2023 and 2022, respectively. These related interest and penalties are recognized in “Income taxes payable” within the Consolidated Balance Sheets.