14. INCOME TAXES

As of June 30, 2018, the Company had net deferred tax assets of $11,980, which is recorded as a deferred tax asset of $12,136 specific to Silvercrest which consists primarily of assets related to temporary differences between the financial statement and tax bases of intangible assets related to its acquisition of partnership units of SLP, a deferred tax liability of $103 specific to SLP which consists primarily of liabilities related to differences between the financial statement and tax bases of intangible assets offset in part by amounts for deferred rent expense and a deferred tax liability of $53 related to the corporate activity of SFS which is primarily related to temporary differences between the financial statement and tax bases of intangible assets.  Of the total net deferred taxes at June 30, 2018, $61 of the net deferred tax liabilities relate to non-controlling interests. These amounts are included in prepaid expenses and other assets and deferred tax and other liabilities on the Condensed Consolidated Statement of Financial Condition, respectively.      

As of December 31, 2017, the Company had a net deferred tax asset of $11,612, which is recorded as a net deferred tax asset of $11,838 specific to Silvercrest, which consists primarily of net assets related to temporary differences between the financial statement and tax bases of intangibles related to its acquisition of partnership units of SLP, a net deferred tax liability of $113 specific to SLP which consists primarily of liabilities related to differences between the financial statement and tax bases of intangible assets, and a net deferred tax liability of $113 related to the corporate activity of SFS which is primarily related to temporary differences between the financial statement and tax bases of intangible assets.  

The current tax expense was $1,250 and $1,063 for the three months ended June 30, 2018 and 2017, respectively. Of the amount for the three months ended June 30, 2018, $701 relates to Silvercrest’s corporate tax expense, $547 relates to SLP’s state and local liability and $2 relates to SFS’s corporate tax expense.  The deferred tax expense for the three months ended June 30, 2018 and 2017 was $81 and $476, respectively.  When combined with current tax expense, the total income tax provision for the three months ended June 30, 2018 and 2017 is $1,331 and $1,539, respectively.  There was no material discrete tax expense for the three months ended June 30, 2018.  The tax expense for the three months ended June 30, 2017 also includes additional tax benefits expense of $29 for discrete items. The discrete items for the three months ended June 30, 2017 are primarily attributable to adjustments to the value of deferred tax assets for SLP and Silvercrest.

The current tax expense was $2,411 and $2,064 for the six months ended June 30, 2018 and 2017, respectively. Of the amount for the six months ended June 30, 2018, $1,299 relates to Silvercrest’s corporate tax expense, $1,109 relates to SLP’s state and local liability and $3 relates to SFS’s corporate tax expense.  The deferred tax expense for the six months ended June 30, 2018 and 2017 was $211 and $907, respectively.  When combined with current tax expense, the total income tax provision for the six months ended June 30, 2018 and 2017 is $2,622 and $2,971, respectively.  There was no material discrete tax expense for the six months ended June 30, 2018.  The tax expense for the six months ended June 30, 2017 also includes additional tax benefits expense of $32 for discrete items. The discrete items for the six months ended June 30, 2017 are primarily attributable to adjustments to the value of deferred tax assets for Silvercrest.

The current tax expense increased from the comparable period in 2017 mainly due to increased profitability and an unfavorable timing difference related to SLP’s leases which was partially offset by the current tax benefit related to the reduction in the corporate tax rate from 35% to 21%.

Of the total current tax expense for the three months ended June 30, 2018 and 2017, $214 and $199, respectively, relates to non-controlling interests.  Of the deferred tax expense for the three months ended June 30, 2018 and 2017, ($12) and $2, respectively, relates to non-controlling interests.  When combined with current tax expense, the total income tax provision for the three months ended June 30, 2018 and 2017 related to non-controlling interests is $202 and $201, respectively.

Of the total current tax expense for the six months ended June 30, 2018 and 2017, $442 and $382, respectively, relates to non-controlling interests.  Of the deferred tax expense for the six months ended June 30, 2018 and 2017, ($28) and $4, respectively, relates to non-controlling interests.  When combined with current tax expense, the total income tax provision for the six months ended June 30, 2018 and 2017 related to non-controlling interests is $414 and $386, respectively.

In the normal course of business, the Company is subject to examination by federal, state, and local tax regulators. As of June 30, 2018, the Company’s U.S. federal income tax returns for the years 2014 through 2017 are open under the normal three-year statute of limitations and therefore subject to examination.

The impact from the Tax Cuts and Jobs Act of 2017 is incorporated in the Condensed Consolidated Financial Statements. The corporate rate reduction from 35% to 21% has been reflected in our annualized effective tax rate.  No other provisions of the Act have a material impact on the Company’s 2018 effective tax rate.

The guidance for accounting for uncertainty in income taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company does not believe that it has any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.  Furthermore, the Company does not have any material uncertain tax positions at June 30, 2018 and 2017.