14. INCOME TAXES

As of September 30, 2023, the Company had net deferred tax assets of $5,196, which is recorded as a deferred tax asset of $5,525 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 $322 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 $7 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, 2023, $111 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, 2022, the Company had a net deferred tax asset of $6,634, which is recorded as a net deferred tax asset of $6,915 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 $261 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 $20 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 Company has recorded a deferred tax asset associated with net operating losses of its foreign subsidiary. Realization of the deferred tax asset is contingent on the foreign subsidiary generating future taxable income. Given the foreign subsidiary has recently initiated operations and does not yet have a history of sales, the Company has concluded that the deferred tax asset does not currently meet the more-likely-than-not threshold for realizability. Accordingly, a full valuation allowance has been recorded with respect to the net operating losses of the Company’s foreign subsidiary in the amount of $116 at September 30, 2023. As of December 31, 2022, the amount of the valuation allowance was $68.

The current tax expense was $935 and $662 for the three months ended September 30, 2023 and 2022, respectively. Of the amount for the three months ended September 30, 2023, $669 relates to Silvercrest’s corporate tax expense, $266 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, 2023 and 2022 was $457 and $798, respectively. When combined with current tax expense, the total income tax provision for the three months ended September 30, 2023 and 2022 is $1,392 and $1,460, respectively. There was no material discrete tax expense for the three months ended September 30, 2023. The discrete tax expense for the three months ended September 30, 2022 was $73. For 2022, the discrete tax expense represents an increase to 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 was $2,522 and $3,394 for the nine months ended September 30, 2023 and 2022, respectively. Of the amount for the nine months ended September 30, 2023, $1,778 relates to Silvercrest’s corporate tax expense, $743 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, 2023 and 2022 was $1,579 and $3,393, respectively. When combined with current tax expense, the total income tax provision for the nine months ended September 30, 2023 and 2022 is $4,101 and $6,787, respectively. There was no material discrete tax expense for the nine months ended September 30, 2023. The discrete tax expense for the nine months ended September 30, 2022 was $2,043. For 2022, the discrete tax expense represents an increase to 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 decreased from the comparable period in 2022 mainly due to decreased profitability.

Of the total current tax expense for the three months ended September 30, 2023 and 2022, $90 and $67, respectively, relates to non-controlling interests. Of the deferred tax expense for the three months ended September 30, 2023 and 2022, $1 and $6, respectively, relates to non-controlling interests. When combined with current tax expense, the total income tax provision for the three months ended September 30, 2023 and 2022 related to non-controlling interests is $91 and $73, respectively.

Of the total current tax expense for the nine months ended September 30, 2023 and 2022, $250 and $261, respectively, relates to non-controlling interests. Of the deferred tax expense for the nine months ended September 30, 2023 and 2022, $17 and $47, respectively, relates to non-controlling interests. When combined with current tax expense, the total income tax provision for the nine months ended September 30, 2023 and 2022 related to non-controlling interests is $267 and $308, respectively.

In the normal course of business, the Company is subject to examination by federal, state, and local tax regulators. As of September 30, 2023, the Company’s U.S. federal income tax returns for the years 2020 through 2023 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, 2023 and 2022.