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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
14. Income Taxes
Transition to Taxable C Corporation
In 2022, the Company’s Board of Directors and management agreed to discontinue actions necessary to maintain qualification as a REIT. Commencing with the taxable year ended December 31, 2022, all of the Company’s taxable income, except for income generated by subsidiaries that have elected REIT status, is subject to U.S. federal and state income tax at the applicable corporate tax rate.
The Company’s transition to a taxable C Corporation in 2022, in and of itself, did not result in significant incremental current income tax expense due to the availability of significant capital loss and net operating loss (“NOL”) carryforwards. The Company's primary source of income subject to tax remains its investment management business, which was already subject to tax through its previously designated taxable REIT subsidiaries.
Income Tax Benefit (Expense)
The components of current and deferred tax benefit (expense) are as follows.
Year Ended December 31,
(In thousands)202320222021
Current
Federal$167 $3,986 $3,369 
State and local1,058 (786)(19)
Foreign(1,252)(1,163)— 
Total current tax benefit (expense)(27)2,037 3,350 
Deferred
Federal(1,004)(13,850)15,615 
State and local124 (2,419)2,498 
Foreign901 1,100 — 
Total deferred tax benefit (expense)21 (15,169)18,113 
Income tax benefit (expense) on continuing operations$(6)$(13,132)$21,463 
The Company has no income tax benefits recognized for uncertain tax positions.
Deferred Income Tax Asset and Liability
Deferred tax asset and deferred tax liability are presented within other assets, and other liabilities, respectively.
The components of deferred tax asset and deferred tax liability are as follows.
(In thousands)December 31, 2023December 31, 2022
Deferred tax asset
Capital losses (1)
$366,083 $252,904 
Net operating losses (2)
146,537 92,224 
Investment in partnerships131,828 317,048 
Equity-based compensation15,104 11,856 
Intangible assets5,013 5,959 
Deferred income2,576 2,086 
Deferred interest expense6,050 5,556 
Lease liability—corporate offices
12,507 9,341 
Lease liability—investment properties
— 6,789 
Other4,487 5,847 
Gross deferred tax asset690,185 709,610 
Valuation allowance(664,397)(679,057)
Deferred tax asset, net of valuation allowance25,788 30,553 
Deferred tax liability
Intangible assets23,382 13,725 
ROU lease asset—corporate offices
8,527 5,350 
ROU lease asset—investment properties
— 6,026 
Other1,909 3,408 
Gross deferred tax liability33,818 28,509 
Net deferred tax asset (liability)$(8,030)$2,044 
__________
(1)    At December 31, 2023, deferred tax asset was recognized on capital losses of $1.38 billion, which expire between 2024 and 2028, with full valuation allowance established.
(2)     At December 31, 2023 and 2022, deferred tax asset was recognized on NOL of $589.7 million and $378.7 million, respectively, for which full valuation allowance was established in both years. NOL, which is largely attributable to U.S. federal losses incurred after December 31, 2017, can be carried forward indefinitely.
Valuation Allowance
Changes in the deferred tax asset valuation allowance are presented below:
Year Ended December 31,
(In thousands)202320222021
Beginning balance $679,057 $12,766 $1,852 
Addition19,483 666,291 33,756 
Utilization and/or reversal(34,143)— (22,842)
Ending balance664,397 $679,057 $12,766 
Deferred Income Taxes
In 2022, significant deferred tax assets were recognized with an offsetting valuation allowance. As a result of the Company's transition to a taxable C Corporation, $400.2 million of deferred tax asset was recognized as of January 1, 2022 related principally to capital loss carryforwards and outside basis difference in DBRG's interest in the OP, and $134.2 million was recorded during the year related to changes in DBRG’s interest in the OP that were treated as equity transactions. Outside basis difference in investment in partnerships along with NOL generated by a subsidiary during the year further contributed to the deferred tax asset balance in 2022. At December 31, 2022, it was determined that the realizability of these deferred tax assets did not meet the more-likely-than-not threshold, and consequently, a full valuation allowance was established against these deferred tax assets. In assessing realizability, the Company determined that there were no prudent and feasible tax planning strategies that the Company could employ to reasonably assure the future realizability of its carryforward losses and other deferred tax assets. In the absence of tax planning strategies and given the Company’s history of cumulative operating losses, which was largely a product of the recent transition in the Company's business, it was difficult to overcome the resulting uncertainties over the Company’s ability to generate future taxable income to realize these deferred tax assets.
As of December 31, 2023, a full valuation allowance has been maintained as the more-likely-than-not threshold continues to not be met in assessing realizability of deferred tax assets. As a result, income tax expense in 2023 generally reflects the income tax effect of foreign subsidiaries.
In future periods, if the realizability of all or some portion of these deferred tax assets becomes more likely than not, the associated valuation allowance would be reversed as a deferred tax benefit.
Foreign Subsidiary Earnings
The Company has evaluated all unremitted earnings of its foreign subsidiaries, which may be repatriated at the Company’s election, and has not recorded any deferred tax liability as no material taxes are expected to be due if and when these amounts are repatriated.
Effective Income Tax
Income tax benefit (expense) attributable to continuing operations varied from the amount computed by applying the statutory income tax rate to loss from continuing operations before income taxes. The following table presents a reconciliation of the statutory U.S. income tax to the Company's effective income tax attributable to continuing operations:
Year Ended December 31,
(In thousands)202320222021
Income (Loss) from continuing operations before income taxes$365,629 $(46,681)$(55,999)
Income (Loss) from continuing operations before income taxes attributable to pass-through subsidiariesNANA(5,905)
Income (Loss) from continuing operations before income taxes attributable to taxable subsidiaries365,629 (46,681)(61,904)
Federal income tax benefit (expense) at statutory tax rate (21%)(76,782)9,802 13,000 
State and local income taxes, net of federal income tax benefit(21,970)5,559 1,930 
Foreign income tax differential36 782 — 
Effect of change in income tax rate34,684 — — 
Noncontrolling interests(27,699)(44,014)— 
Separately taxable subsidiaries of OP15,213 21,226 — 
Change in ownership of OP, including equity reallocation (Note 2)— (2,838)— 
Equity-based compensation682 1,971 1,814 
Valuation allowance (1)
76,087 (784)1,852 
Other, net(257)(4,836)2,867 
Income tax benefit (expense) on continuing operations$(6)$(13,132)$21,463 
__________
(1)     2022 excludes changes in valuation allowance related to the Company's transition to taxable C Corporation as of January 1, 2022, outside basis difference in changes in DBRG’s interest in the OP that were treated as equity transactions, and other activities associated with discontinued operations.
Tax Examinations
The Company is no longer subject to new income tax examinations by U.S. tax authorities for years prior to 2019.