INCOME TAXES
The Partnership itself is not subject to income taxes. Instead, partners are taxed on their share of the Partnership’s taxable income, whether or not cash distributions are paid. The Partnership’s and Funds’ corporate subsidiaries, however, are subject to income taxes. The following tables provide information on the impact of income taxes in taxable subsidiaries. Consolidated Partnership income (loss) is reconciled to income (loss) before income taxes in corporate subsidiaries for the years ended December 31 as follows:
|
| | | | | | | | | | | |
(in thousands) | 2017 | | 2016 | | 2015 |
Income before income taxes | $ | 25,581 |
| | $ | 2,215 |
| | $ | 7,707 |
|
Income in entities that pass-through pre-tax earnings to the partners | 23,089 |
| | 1,500 |
| | 7,203 |
|
Income subject to income taxes | $ | 2,492 |
| | $ | 715 |
| | $ | 504 |
|
The provision for income taxes relating to corporate subsidiaries of the Partnership and Funds consist of the following income tax benefit (expense) for each of the years ended December 31:
|
| | | | | | | | | | | |
(in thousands) | 2017 | | 2016 | | 2015 |
Current | $ | (888 | ) | | $ | (185 | ) | | $ | (328 | ) |
Deferred | (288 | ) | | (67 | ) | | 121 |
|
Total | $ | (1,176 | ) | | $ | (252 | ) | | $ | (207 | ) |
Included in the deferred income tax expense for 2017 and 2016 are $109,000 and $115,000 related to the utilization of net operating loss carryforwards. Included in the deferred tax benefit for 2015 was a benefit of $71,000 related to net operating losses. The Partnership also recorded excess tax benefits from equity-based compensation of $53,000 and $340,000 for the years ended December 31, 2016 and 2015, respectively, to partners’ capital. There was no
excess tax benefit recorded for 2017 as a result of the adoption of ASU 2016-09.
A reconciliation between the federal statutory tax rate and the Partnership’s effective tax rate is as follows for each of the years ended December 31:
|
| | | | | | | | |
| 2017 | | 2016 | | 2015 |
Statutory tax on income | 34 | % | | 34 | % | | 34 | % |
Income from entities that pass-through pre-tax earnings to the partners | (30 | )% | | (23 | )% | | (31 | )% |
Effect on deferred tax assets of change in income tax rate | 1 | % | | — | % | | — | % |
Effective income tax rate | 5 | % | | 11 | % | | 3 | % |
The Tax Cuts and Jobs Act passed by Congress in December 2017 reduced the corporate income tax rate to 21% from 34%. This had the impact of decreasing deferred tax assets by $264,000 and increasing the 2017 effective income tax rate by 1%.
The net deferred tax assets are included in other assets on the consolidated balance sheets and are comprised of the following:
|
| | | | | | | | | | | |
(in thousands) | 2017 | | 2016 | | 2015 |
Compensation-related accruals | $ | 359 |
| | $ | 456 |
| | $ | 421 |
|
Net operating loss carryforwards | 123 |
| | 284 |
| | 399 |
|
Depreciation | 15 |
| | 16 |
| | (16 | ) |
Other | (32 | ) | | (3 | ) | | 16 |
|
Total | $ | 465 |
| | $ | 753 |
| | $ | 820 |
|
The federal net operating loss carryforwards in the table above expire in 2033 through 2035.