14. INCOME TAXES

As of September 30, 2021, the Company had net deferred tax assets of $10,976, which is recorded as a deferred tax asset of $11,100 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 asset of $82 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 $42 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 September 30, 2021, $42 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, 2020, the Company had a net deferred tax asset of $11,305, which is recorded as a net deferred tax asset of $11,397 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 $37 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 $55 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 $1,401 and $1,576 for the three months ended September 30, 2021 and 2020, respectively. Of the amount for the three months ended September 30, 2021, $945 relates to Silvercrest’s corporate tax expense, $455 relates to SLP’s state and local liability and $0 relates to SFS’s corporate tax expense.  The deferred tax expense for the three months ended September 30, 2021 and 2020 was $378 and ($217), respectively.  When combined with current tax expense, the total income tax provision for the three months ended September 30, 2021 and 2020 is $1,779 and $1,359, respectively.  The discrete tax expense for the three months ended September 30, 2021 and 2020 was ($107) and ($99), respectively.  For both 2021 and 2020, the discrete tax expense represents a reduction to tax expense associated with an unfavorable fair value adjustment to contingent purchase price consideration related to earnout payments to be made in conjunction with the Cortina Acquisition.

The current tax expense was $4,178 and $2,817 for the nine months ended September 30, 2021 and 2020, respectively. Of the amount for the nine months ended September 30, 2021, $2,836 relates to Silvercrest’s corporate tax expense, $1,340 relates to SLP’s state and local liability and $1 relates to SFS’s corporate tax expense.  The deferred tax expense for the nine months ended September 30, 2021 and 2020 was $452 and $1,741, respectively.  When combined with current tax expense, the total income tax provision for the nine months ended September 30, 2021 and 2020 is $4,630 and $4,558, respectively.  The discrete tax expense for the nine months ended September 30, 2021 and 2020 was ($866) and $197, respectively.  For 2021, this represents a reduction to tax expense associated with an unfavorable fair value adjustment to contingent purchase price consideration related to earnout payments to be made in conjunction with the Cortina Acquisition. For 2020, 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.  

The current tax expense increased from the comparable period in 2020 mainly due to increased profitability.

Of the total current tax expense for the three months ended September 30, 2021 and 2020, $155 and $212, respectively, relates to non-controlling interests.  Of the deferred tax expense for the three months ended September 30, 2021 and 2020, $30 and ($56), respectively, relates to non-controlling interests.  When combined with current tax expense, the total income tax provision for the three months ended September 30, 2021 and 2020 related to non-controlling interests is $185 and $156, respectively.

Of the total current tax expense for the nine months ended September 30, 2021 and 2020, $452 and $490, respectively, relates to non-controlling interests.  Of the deferred tax expense for the nine months ended September 30, 2021 and 2020, $10 and $12, respectively,

relates to non-controlling interests.  When combined with current tax expense, the total income tax provision for the nine months ended September 30, 2021 and 2020 related to non-controlling interests is $462 and $502, respectively.

In the normal course of business, the Company is subject to examination by federal, state, and local tax regulators. As of September 30, 2021, the Company’s U.S. federal income tax returns for the years 2017 through 2021 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 September 30, 2021 and 2020.