The taxable results of the Company's U.S. operations are included in the consolidated income tax returns of Cowen Inc. as well as stand-alone state and local tax returns. The Company has subsidiaries that are resident in foreign countries where tax filings have to be submitted on a stand-alone or combined basis. These subsidiaries are subject to tax in their respective countries and the Company is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries with tax filing obligations are the United Kingdom, Luxembourg, Germany, Switzerland, South Africa, Canada and Hong Kong.

The Company has reflected the impact of the TCJ Act in the financial statements, including a policy election to account for taxes on Global Intangible Low Tax Income ("GILTI") as incurred on the current year basis and not included in deferred taxes. The Company continues to monitor the impact of the TCJ Act as additional regulations and formal guidance are provided.


	Year ended December 31,
	2019		2018		2017
	(dollars in thousands)

Current tax expense/(benefit)
Federal	$	(731)	$	(1,883)	$	421
State and local	457		(2,148)		2,034
Foreign	1,831		785		428
Total	$	1,557	$	(3,246)	$	2,883
Deferred tax expense/(benefit)
Federal	$	10,242	$	12,018	$	44,071
State and local	3,598		6,956		(2,938)
Foreign	(544)		(9)		37
Total	13,296		18,965		41,170
Total tax expense/(benefit)	$	14,853	$	15,719	$	44,053

Consolidated U.S. income/(loss) before income taxes was $68.9 million in 2019, $93.0 million in 2018, and $3.9 million in 2017. The corresponding amounts for non-U.S.-based income/(loss) were $2.2 million in 2019, $6.0 million in 2018, and $3.1 million in 2017.


	Year ended December 31,
	2019		2018		2017
Pre-tax loss at U.S. statutory rate	21.0	%	21.0	%	35.0	%
Dividend received deduction	—		—		(25.9)
Bargain purchase gain	—		—		(34.8)
Basis adjustment on investments	—		3.5		65.2
Nondeductible expenses	4.1		1.2		14.2
Goodwill impairment	1.2		—		—
Change in valuation allowance	(4.0)		7.1		—
Impact of tax law change	—		—		669.8
State and foreign tax	8.0		(10.0)		25.3
Reversal of income attributable to non-controlling interests	(9.2)		(8.6)		(119.6)
Other, net	(0.1)		1.7		3.7
Total	21.0	%	15.9	%	632.9	%

As of December 31, 2019, the Company has net income taxes receivable of approximately $6.5 million representing federal, state and foreign tax overpayments, which is included in other assets on the accompanying consolidated statements of financial condition.


	As of December 31,
	2019		2018
	(dollars in thousands)
Deferred tax assets, net of valuation allowance
Net operating loss	$	60,160	$	48,294
Deferred compensation	46,545		59,697


Intangible assets	2,969		—
Tax credits	6,716		9,036
Lease liability	24,623		2,098
Other	3,043		2,444
Total deferred tax assets	144,056		121,569
Valuation allowance	(5,234)		(9,135)
Deferred tax assets, net of valuation allowance	138,822		112,434
Deferred tax liabilities
Right-of-use assets	(23,028)		—
Unrealized gains on investments	(26,545)		(13,092)
Amortization of bond discount	(3,980)		(4,643)
Other	(6,103)		(1,642)
Total deferred tax liabilities	(59,656)		(19,377)
Deferred tax assets/(liabilities), net	$	79,166	$	93,057

Deferred tax assets, net of valuation allowance, are reported in the accompanying consolidated statements of financial condition. In addition to the deferred tax balances in the table above, the Company records balances related to its operating losses in Luxembourg, which are discussed below.

The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. The Company recorded approximately $5.2 million valuation allowance against its deferred tax assets of $144.1 million as of December 31, 2019 and recorded approximately $9.1 million valuation

allowance against its deferred tax assets of $121.6 million as of December 31, 2018. Separately, the Company has deferred tax liabilities of $59.7 million as of December 31, 2019 and $19.4 million as of December 31, 2018.

For tax year 2019, the Company's total deferred tax expense of $13.3 million was derived by the reversal of timing differences in the normal course of business. The deferred tax expense of $19.0 million in 2018 was derived by the basis difference from the disposal of assets and the reversal of timing differences in the normal course of business. The deferred tax expense of $41.2 million in 2017 predominantly related to the impact of the TCJ Act, and the reversal of timing differences in the normal course of business.

As of December 31, 2019, the Company has foreign tax credit carryforwards of $5.6 million which expire between 2019 and 2029. Valuation allowance of $4.2 million was established against foreign tax credit carryforward as the Company determined that it is not more likely than not that the credits will be utilized.

In addition to the net operating loss carryforwards in the table above, the Company also has net operating loss carryforwards in Luxembourg. These loss carryforwards are only accessible to the extent of taxable income generated by the Luxembourg reinsurance companies, including any deferred income that will be generated in the future. Consequently, the Company recorded a deferred tax asset of $258.4 million, net of deferred tax liabilities of $224.5 million in connection with future taxable income, and an offsetting valuation allowance of $258.4 million against its Luxembourg net operating loss carryforwards that are in excess of such taxable income.

In June 2011, the Company underwent a change of control under Section 382 of the Internal Revenue Code by the acquisition of a subsidiary with net operating loss carryovers. According, a portion of the Company's deferred tax assets, are subject to an annual limitation under Section 382. The deduction limitation is approximately $6.7 million annually and applies to approximately $30.3 million of net operating losses. The Company is not expected to lose any deferred tax assets as a result of these limitations.


	As of December 31,
	2019		2018
	(dollars in thousands)
Beginning balance at January 1	$	299	$	3,947


Increases/(Decreases) due to current year positions	—		(3,648)
Ending balance at December 31	$	299	$	299

No unrecognized tax benefit was recognized in the consolidated statement of operations for the year ended December 31, 2019. No income tax-related interest and penalties are recognized in the consolidated statement of financial condition at December 31, 2019.