Income taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

Income tax expenses (benefits) shown in the consolidated income statements are reconciled to amounts of tax that would have been payable (recoverable) from the application of the federal tax rate to pre-tax profit, as follows:

(Expressed in thousands)
	For the Years Ended December 31,
	2021				2020				2019
	Amount		Percentage		Amount		Percentage		Amount		Percentage
U.S. federal statutory income tax	$	47,176	21.0	%	$	35,491	21.0	%	$	15,732	21.0	%
U.S. state and local income taxes, net of U.S. federal income tax benefits	13,585		6.0	%	8,770		5.2	%	4,258		5.7	%
Unrecognized tax benefit	59		—	%	(853)		-0.5	%	—		—	%
Valuation allowance	1,121		0.5	%	517		0.3	%	1,663		2.2	%
Non-taxable income	(430)		(0.2)	%	(580)		(0.3)	%	(738)		(1.0)	%
Provision to return adjustments	281		0.1	%	239		0.1	%	(723)		(1.0)	%
Change in state and foreign tax rates	1,384		0.6	%	238		0.1	%	(135)		(0.2)	%
Foreign tax rate differentials	(223)		(0.1)	%	(469)		(0.3)	%	(59)		(0.1)	%
Excess tax benefits from share-based awards	(1,542)		(0.7)	%	(1,008)		(0.6)	%	(234)		(0.3)	%
Non-Deductible Executive Compensation	3,956		1.8	%	2,831		1.7	%	1,072		1.4	%
Other non-deductible expenses	310		0.2	%	838		0.5	%	1,123		1.6	%
Total income taxes	$	65,677	29.2	%	$	46,014	27.2	%	$	21,959	29.3	%

Income tax expenses (benefits) included in the consolidated income statements represent the following:

(Expressed in thousands)
	For the Years Ended December 31,
	2021		2020		2019
Current:
U.S. federal tax	$	47,880	$	17,794	$	9,502
State and local tax	18,331		6,498		2,289
Non-U.S. operations	258		386		290
Total Current	66,469		24,678		12,081
Deferred:
U.S. federal tax	(1,745)		17,182		7,177
State and local tax	790		4,310		2,924
Non-U.S. operations	163		(156)		(223)
Total Deferred	(792)		21,336		9,878
Total	$	65,677	$	46,014	$	21,959

Pre-tax loss with respect to non-U.S. operations was $1.2 million for the years ended December 31, 2021. (Pre-tax income with respect to non-U.S. operation was $1.5 million for the year ended December 31, 2020). Pre-tax loss with respect to non-U.S. operations was $4.9 million for the year ended December 31, 2019.

The effective income tax rate for the year ended December 31, 2021 was 29.2% compared with 27.2% for the year ended December 31, 2020. The higher tax rate in the current year was primarily due to an increase in apportionment factors in state and local jurisdictions with higher statutory tax rates.

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 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:

(Expressed in thousands)
	As of December 31,
	2021		2020
Deferred tax assets:
Deferred compensation	$	31,083	$	24,782
Deferred rent and lease incentives	10,828		9,951
Net operating losses and credits	9,304		8,664
Receivable reserves	2,257		1,290
Accrued expenses	3,516		407
Auction rate securities reserves	1,387		1,366
Involuntary conversion	1,749		1,693
Other	986		1,010
Total deferred tax assets	61,110		49,163
Valuation allowance	(6,153)		(5,059)
Deferred tax assets after valuation allowance	54,957		44,104
Deferred tax liabilities:
Goodwill	42,455		41,128
Partnership investments	37,196		32,978
Company-owned life insurance	16,854		13,037
Depreciation	2,139		1,552
Other	329		318
Total deferred tax liabilities	98,973		89,013
Deferred tax liabilities, net	$	(44,016)	$	(44,909)

The Company had deferred tax assets at December 31, 2021 of $3.2 million arising from net operating losses incurred by Oppenheimer Israel (OPCO) Ltd. The Company believes that realization of the deferred tax assets is more likely than not based on expectations of future taxable income in Israel. These net operating losses carry forward indefinitely and are not subject to expiration, provided that these subsidiaries and their underlying businesses continue operating normally (as is anticipated). As of December 31, 2021, the Company had deferred tax assets of $3.5 million arising from net operating losses incurred by Oppenheimer Europe Ltd and had recorded full valuation allowances as the Company believes it is more likely than not that the Company will not be able to realize its deferred tax assets in the future.

Goodwill arising from the acquisitions of Josephthal Group Inc. and the Oppenheimer Divisions was amortized for tax purposes on a straight-line basis over 15 years. The difference between book and tax is recorded as a deferred tax liability.

The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. The Company has closed tax years through 2017 in the U.S. federal jurisdiction.

The Company has unrecognized tax benefits of $0.3 million, $0.2 million and $1.1 million as of December 31, 2021, 2020 and 2019, respectively (as shown on the table below). Included in the balance of unrecognized tax benefits as of December 31, 2021 and 2020 were $271,000 and $167,000, respectively, of tax benefits for either year that, if recognized, would affect the effective tax rate.

During the year ended December 31, 2021, the Company released $0.2 million in unrecognized tax benefits and added $0.3 million related to state and local tax matters. The Company does not believe any unrecognized tax benefit will significantly increase or decrease within twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefit follows:

(Expressed in thousands)
	2021		2020		2019
Balance at beginning of year	$	212	$	1,079	$	1,079
Additions for tax positions of prior years	343		212		—
Lapse in statute of limitations	—		—		—
Settlements with taxing authorities	(212)		(1,079)		—
Balance at end of year	$	343	$	212	$	1,079

In its consolidated income statements, the Company records interest and penalties accruing on unrecognized tax benefits in pre-tax income as interest expense and other expense, respectively. For the year ended December 31, 2021, 2020 and 2019, the Company released tax-related interest expense of $164,000, $227,000 and $87,000, respectively, in its consolidated income statement. As of December 31, 2021 and 2020, the Company had an income tax-related interest payable of $41,000 and $205,000, respectively, on its consolidated balance sheets.