INCOME TAXES |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES The Company is taxed as a corporation for U.S. federal and state income tax purposes. In addition to U.S. federal and state income taxes, the Company is subject to local and foreign income taxes, with respect to the Company’s allocable share of any taxable income generated by the Operating Company that flows through to the Company.
The Operating Company and its subsidiaries, other than BIGRM and BPM, are limited liability companies or limited partnerships and, as such, are not subject to income taxes. The individual owners of the Operating Company and its subsidiaries are required to report their distributive share of realized income, gains, losses, deductions, or credits on their individual income tax returns.
The deferred income tax asset related to the TRA and the corresponding TRA liability as of September 30, 2023 was $59.6 million and $55.0 million, respectively, and $53.9 million and $52.0 million as of December 31, 2022, respectively. The increase in the deferred income tax asset during the three and nine months ended September 30, 2023 was primarily attributed to the collapse of 2020 and 2021 profits interests awards into shares of Class A common stock and Class A Units, as further described in Note 16.
The Company’s effective tax rate is dependent on many factors, including the estimated amount of income subject to tax. Consequently, the effective tax rate can vary from period to period. The Company’s overall effective tax rate in each of the periods described above is less than the statutory rate primarily because a portion of income is allocated to non-controlling interests, and the tax liability on such income is borne by the holders of such non-controlling interests.
For the three and nine months ended September 30, 2023, the Company utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, “Income Taxes – Interim Reporting,” to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate (“AETR”) is impractical because it is not possible to reliably estimate the AETR. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of the discrete method is more appropriate than the AETR method as (i) the estimated AETR method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings and (ii) small changes in the projected ordinary annual income would result in significant changes in the AETR. The Company will re-evaluate the use of the discrete method each quarter until it is deemed appropriate to return to the AETR method.
The Company’s AETR was approximately 1% and 5% for the three and nine months ended September 30, 2022, respectively.
The Company evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized.
As of September 30, 2023, the Company had no unrecognized tax positions and does not expect any changes to uncertain tax positions within the next 12 months. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local and foreign tax authorities. Although the outcome of tax audits is always uncertain, based on information available to the Company as of the date hereof, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s condensed consolidated financial statements.
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