14. INCOME TAXES

As of March 31, 2020, the Company had net deferred tax assets of $11,031, which is recorded as a deferred tax asset of $11,419 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 $319 specific to SLP which consists primarily of assets related to deferred rent expenses offset in part by amounts for differences in the financial statement and tax bases of intangible assets and a deferred tax liability of $69 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 March 31, 2020, $131 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, 2019, the Company had a net deferred tax asset of $13,103, which is recorded as a net deferred tax asset of $13,190 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 $14 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 $73 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 $440 and $614 for the three months ended March 31, 2020 and 2019, respectively. Of the amount for the three months ended March 31, 2020, $10 relates to Silvercrest’s corporate tax expense, $429 relates to SLP’s state and local liability and $1 relates to SFS’s corporate tax expense.  The deferred tax expense for the three months ended March 31, 2020 and 2019 was $2,306 and $409 , respectively.  When combined with current tax expense, the total income tax provision for the three months ended March 31, 2020 and 2019 is $2,746 and $1,023, respectively.  The discrete tax expense for the three months ended March 31, 2020, was $1,096. This represents additional tax expense associated with a favorable fair value adjustment to contingent purchase price consideration related to earnout payments to be made in conjunction with the Cortina Acquisition. There was no material discrete tax expense for the three months ended March 31, 2019.

The current tax expense decreased from the comparable period in 2019 mainly due to favorable timing differences related to various deferred assets recorded at SLP.

Of the total current tax expense for the three months ended March 31, 2020 and 2019, $150 and $163, respectively, relates to non-controlling interests.  Of the deferred tax expense for the three months ended March 31, 2020 and 2019, $104 and ($7), respectively, relates to non-controlling interests.  When combined with current tax expense, the total income tax provision for the three months ended March 31, 2020 and 2019 related to non-controlling interests is $254 and $156, respectively.

On March 27, 2020, the Coronavirus Aid Relief, and Economic Security Act (CARES Act) was enacted and signed into law in response to the COVID-19 pandemic. The assistance includes tax relief and government loans, grants and investments for entities in affected industries.  Key income tax provisions of the CARES Act include (i) business tax provisions which would eliminate the taxable income limit for certain net operating losses (‘NOL’) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years; (ii) generally loosen the business interest limitation under section 163(j) from 30 percent to 50 percent; and (iii) fix the ‘retail glitch’ for qualified improvement property to allow for 100% bonus depreciation. As a result of the change to qualified improvement property, the Company will receive accelerated tax deductions upon filing its 2019 tax return and current benefit of approximately $700 thousand has been recorded, along with a corresponding deferred tax liability. There were no other material adjustments recorded.

In the normal course of business, the Company is subject to examination by federal, state, and local tax regulators. As of March 31, 2020, the Company’s U.S. federal income tax returns for the years 2016 through 2020 are open under the normal three-year statute of limitations and therefore subject to examination.

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 March 31, 2020 and 2019.