
	March 31, 2020			December 31, 2019
Deferred tax assets:
Capital losses	$	17,002		$	8,226
Operating lease liabilities		5,295			5,529
NOLs – International		5,233			9,336
Goodwill and intangible assets		1,622			1,671
Stock-based compensation		1,115			1,754
NOLs – U.S.		514			642
Accrued expenses		373			4,054
Outside basis differences		123			123
Other		159			218

Deferred tax assets		31,436			31,553

Deferred tax liabilities:
Right of use assets – operating leases		4,189			4,400
Fixed assets and prepaid assets		1,309			1,326
Unrealized gains		717			744

Deferred tax liabilities		6,215			6,470

Total deferred tax assets less deferred tax liabilities		25,221			25,083
Less: valuation allowance		(22,358	)		(17,685	)

Deferred tax assets, net	$	2,863		$	7,398

Net Operating and Capital Losses – U.S

The Company’s tax effected net operating losses (“NOLs”) at March 31, 2020 were $514 which expire in 2024. The net operating loss carryforwards have been reduced by the impact of annual limitations described in the Internal Revenue Code Section 382 that arose as a result of an ownership change.

The Company’s tax effected capital losses at March 31, 2020 and December 31, 2019 were $17,002 and $8,226, respectively. The change in capital losses is due to the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 7

) and a capital loss recognized upon sale of the Canadian ETF business.

Net Operating Losses – International

Certain of the Company’s European subsidiaries generated NOLs outside the U.S. These tax effected NOLs were $5,233 and $9,336 at

March 31, 2020 and December 31, 2019, respectively. All of these NOLs at March 31, 2020 are carried forward indefinitely. The reduction in NOLs was due to the sale of the Company’s Canadian ETF business, which occurred on February 19, 2020 (Note 24).

Valuation Allowance

The Company’s valuation allowance has been established on its net capital losses, international net operating losses and outside basis differences as it is

more-likely-than-not

that these deferred tax assets will not be realized.

Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”)

On March 27, 2020, the CARES Act was enacted in response to the

COVID-19

pandemic which included temporary changes to income and

non-income

based tax laws including: (i) the elimination of the 80% of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 and 2020; (ii) allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years; (iii) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years beginning January 1, 2019 and 2020; and (iv) other related provisions. The CARES Act did not have a material impact on the Company’s consolidated financial statements.

Uncertain Tax Positions

Tax positions are evaluated utilizing a

two-step

process. The Company first determines whether any of its tax positions are more-

likely-than-not

to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

In connection with the ETFS Acquisition, the Company accrued a liability for uncertain tax positions and interest and penalties at the acquisition date. The table below sets forth the aggregate changes in the balance of these gross unrecognized tax benefits during the three months ended March 31, 2020:


	Total			Unrecognized Tax Benefits			Interest and Penalties
Balance on January 1, 2020	$	32,101		$	25,998		$	6,103
Decrease - Lapse of statute of limitations (1)		(5,981	)		(4,620	)		(1,361	)
Increases		76			—			76
Foreign currency translation (2)		(1,767	)		(1,432	)		(335	)

Balance at March 31, 2020	$	24,429		$	19,946		$	4,483

(1)

Recorded as an income tax benefit of $5,981 during the three months ended March 31, 2020, along with an equal and offsetting amount recorded in other losses, net, to recognize a

reduction in the indemnification asset. During the three months ended March 31, 2019, an income tax benefit of $4,309 was recorded along with an equal and offsetting amount in other losses, net.

(2)	The gross unrecognized tax benefits were accrued in British pounds sterling.

The Company also recorded an offsetting indemnification asset provided by ETFS Capital as part of its agreement to indemnify the Company for any potential claims, for which an amount is being held in escrow. ETFS Capital has also agreed to provide additional collateral by maintaining a minimum working capital balance up to a stipulated amount.

The gross unrecognized tax benefits and interest and penalties totaling $24,429 at March 31, 2020 are included in other

non-current

liabilities on the Consolidated Balance Sheet. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $4,525 (including interest and penalties of $1,317) in the next 12 months upon lapsing of the statute of limitations.

At March 31, 2020, there were $24,429 of unrecognized tax benefits (including interest and penalties) that, if recognized, would impact the effective tax rate. The recognition of any unrecognized tax benefits would result in an equal and offsetting adjustment to the indemnification asset which would be recorded in income before taxes due to the indemnity for any potential claims.

Income Tax Examinations

The Company is subject to U.S. federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions. The Company’s federal tax return and ManJer’s tax return (a Jersey-based subsidiary) for the year ended December 31, 2016 and the Company’s New York state tax return for the years ended December 31, 2015 through 2018 are currently under review by the relevant tax authorities. The Company is indemnified by ETFS Capital for any potential exposure associated with ManJer’s tax return under audit.

The Company is not currently under audit in any other income tax jurisdictions. As of March 31, 2020, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2015.

Undistributed Earnings of Foreign Subsidiaries

Due to the imposition of the

Global Intangible Low-Taxed Income (“

GILTI

”)

provisions, all unremitted earnings are no longer subject to U.S. federal income tax; however, there could be U.S. state and/or foreign withholding taxes upon distribution of such unremitted earnings. The Company recognizes deferred tax liabilities for withholding taxes that may become payable, where applicable, upon the distribution of earnings and profits from foreign subsidiaries unless considered permanent in duration. As of March 31, 2020, the Company considers all undistributed foreign earnings and profits to be permanent in duration.