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 is subject to the Global Intangible Low Taxed Income ("GILTI") tax in the U.S. The Company elected to account for taxes on GILTI inclusions in U.S. taxable income as incurred on the current year basis and not included in deferred taxes.


	Year ended December 31,
	2020		2019		2018
	(dollars in thousands)

Current tax expense/(benefit)
Federal	$	13,840	$	(731)	$	(1,883)
State and local	5,060		457		(2,148)
Foreign	1,355		1,831		785
Total	$	20,255	$	1,557	$	(3,246)
Deferred tax expense/(benefit)
Federal	$	53,231	$	10,242	$	12,018
State and local	17,337		3,598		6,956
Foreign	(450)		(544)		(9)
Total	70,118		13,296		18,965
Total tax expense/(benefit)	$	90,373	$	14,853	$	15,719

Consolidated U.S. income/(loss) before income taxes was $289.6 million in 2020, $68.9 million in 2019, and $93.0 million in 2018. The corresponding amounts for non-U.S.-based income/(loss) were $7.9 million in 2020, $2.2 million in 2019, and $6.0 million in 2018.


	Year ended December 31,
	2020		2019		2018
Pre-tax loss at U.S. statutory rate	21.0	%	21.0	%	21.0	%


Basis adjustment on investments	—		—		3.5
Nondeductible expenses	1.5		4.1		1.2
Goodwill impairment	—		1.2		—
Change in valuation allowance	—		(4.0)		7.1

State and foreign tax	7.3		8.0		(10.0)
Reversal of income attributable to non-controlling interests	0.7		(9.2)		(8.6)
Other, net	(0.1)		(0.1)		1.7
Total	30.4	%	21.0	%	15.9	%

As of December 31, 2020, the Company has net income taxes receivable of approximately $1.2 million representing state and foreign tax overpayments, which is included in other assets on the accompanying consolidated statements of financial condition. The Company also has income taxes payable of approximately $14.1 million representing federal and foreign payables, which is included in other liabilities on the accompany consolidated statements of financial condition.


	As of December 31,
	2020		2019
	(dollars in thousands)
Deferred tax assets, net of valuation allowance
Net operating loss	$	18,039	$	60,160
Deferred compensation	24,068		46,545


Intangible assets	4,513		2,969
Tax credits	6,230		6,716
Lease liability	20,401		24,623
Other	2,858		3,043
Total deferred tax assets	76,109		144,056
Valuation allowance	(5,194)		(5,234)
Deferred tax assets, net of valuation allowance	70,915		138,822
Deferred tax liabilities
Right-of-use assets	(19,443)		(23,028)
Unrealized gains on investments	(33,439)		(26,545)
Amortization of bond discount	(1,686)		(3,980)
Other	(7,317)		(6,103)
Total deferred tax liabilities	(61,885)		(59,656)
Deferred tax assets/(liabilities), net	$	9,030	$	79,166

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 $76.1 million as of December 31, 2020 and recorded approximately $5.2 million valuation allowance against its deferred tax assets of $144.1 million as of December 31, 2019. Separately, the Company has deferred tax liabilities of $61.9 million as of December 31, 2020 and $59.7 million as of December 31, 2019.

For tax year 2020, the Company's total deferred tax expense of $70.1 million was derived by utilization of net operating losses and the reversal of timing differences in the normal course of business. The deferred tax expense of $13.3 million in 2019 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.

As of December 31, 2020, the Company has foreign tax credit carryforwards of $6.2 million which expire between 2021 and 2030. 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 $214.1 million, net of deferred tax liabilities of $110.3 million in connection with future taxable income, and

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 $23.6 million of net operating losses. The Company is not expected to lose any deferred tax assets as a result of these limitations.

As a result of the enactment of Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed on March 27, 2020, and the enactment of Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (“CRRSAA”) signed on December 27, 2020, the Company is required to assess the tax impact of the CARES Act and CRRSAA in the quarter each such law was enacted. Based on the management analysis, there was no material impact on the Company's financial statements as of December 31, 2020.

No unrecognized tax benefit was recognized in the consolidated statement of operations for the year ended December 31, 2020. No income tax-related interest and penalties are recognized in the consolidated statement of financial condition at December 31, 2020.

Currently, the Company is under audit by New York State for the 2013 to 2017 tax years. Management is not expecting a material tax liability from these audits. In December, the Company concluded the State of Massachusetts audit with no financial statement impact.