INCOME TAXES |
9 Months Ended |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES A substantial portion of the Company’s earnings flow through to owners of the Company without being subject to entity level income taxes. Consequently, a significant portion of the Company’s earnings reflects no provision for income taxes except those for foreign, state, city and local income taxes incurred at the entity level. A portion of the Company’s operations is held through AHI, as well as corporate subsidiaries of Ares Holdings and Ares Investments, which are U.S. corporations for tax purposes. AHI is subject to U.S. corporate tax on earnings that flow through from Ares Holdings with respect to both AOG Units and preferred units. The income of these U.S. corporations is subject to U.S. federal, state and local income taxes and certain of its foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income). The Company’s income tax provision includes corporate level income taxes and entity level income taxes, as well as income taxes incurred by certain affiliated funds that are consolidated in these financial statements. The Company had an income tax expense of $4.6 million and $7.6 million for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, the Company had an income tax benefit of $28.5 million primarily driven by the one-time ARCC-ACAS transaction support payment compared to an income tax expense of $7.9 million for the nine months ended September 30, 2016. The Company’s effective income tax rate is dependent on many factors, including the estimated nature of many amounts and the mix of revenues and expenses between U.S. corporate subsidiaries that are subject to income taxes and those subsidiaries that are not. For the three and nine months ended September 30, 2017 and 2016, the Company has utilized the discrete effective tax rate method to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. Additionally, the Company’s effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds that are consolidated in these financial statements. Consequently, the effective income tax rate is subject to significant variation from period to period. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local and foreign tax regulators. As of September 30, 2017, the Company’s U.S. federal income tax returns for the years 2014 through 2017 are open under the normal statute of limitations and therefore subject to examination. State and local tax returns are generally subject to audit from 2013 to 2017. Foreign tax returns are generally subject to audit from 2012 to 2017. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s condensed consolidated financial statements. |