Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

The provision for income taxes consists of the following:



	Year Ended December 31,
	2019			2018			2017
	(Dollars in millions)
Current
Federal income tax	$	1.0		$	2.5		$	(6.2	)
State and local income tax	1.2			0.2			(0.2		)
Foreign income tax	30.1			40.6			38.8
Subtotal	32.3			43.3			32.4
Deferred
Federal income tax	4.5			(13.4		)	106.2
State and local income tax	(0.3		)	(1.7		)	(2.7		)
Foreign income tax	12.5			3.1			(11.0		)
Subtotal	16.7			(12.0		)	92.5
Total provision for income taxes	$	49.0		$	31.3		$	124.9

Summary of tax effects of temporary differences

A summary of the tax effects of the temporary differences is as follows:



	As of December 31,
	2019			2018
	(Dollars in millions)
Deferred tax assets
Federal foreign tax credit	$	11.9		$	11.9
Federal net operating loss carry forward	25.6			25.5
State net operating loss carry forwards	9.4			9.7
Capital loss carry forward	1.6			9.9
Tax basis goodwill and intangibles	105.6			105.1
Depreciation and amortization	16.1			14.0
Deferred restricted common unit compensation	8.5			14.7
Deferred consideration for Carlyle Holdings units (see Note 10)	79.9			—
Lease payable	17.2			—
Accrued compensation	44.1			43.5
Basis difference in investments	17.9			8.9
Other	45.9			44.6
Deferred tax assets before valuation allowance	383.7			287.8
Valuation allowance	(25.7		)	(28.7		)
Total deferred tax assets	$	358.0		$	259.1
Deferred tax liabilities ⁽¹⁾
Intangible assets	$	1.9		$	3.7
Unrealized appreciation on investments	136.2			125.3
Lease assets	15.0			—
Total deferred tax liabilities	$	153.1		$	129.0
Net deferred tax assets (liabilities)	$	204.9		$	130.1

(1)

As of December 31, 2019 and 2018, $87.9 million and $64.7 million, respectively, of deferred tax liabilities were offset and presented as a single deferred tax asset amount on the Company’s balance sheet as these deferred tax assets and liabilities relate to the same jurisdiction.

Reconciliation of provision for income taxes to U.S Federal statutory tax rate

The following table reconciles the provision for income taxes to the U.S. Federal statutory tax rate:



	Year Ended December 31,
	2019		2018		2017
Statutory U.S. federal income tax rate	21.00	%	21.00	%	35.00	%
Income passed through to common unitholders and non-controlling interest holders⁽¹⁾	(19.05	)%	(20.85	)%	(31.55	)%
Reduction in U.S. corporate tax rate	—	%	—	%	7.77	%
Unvested Carlyle Holdings partnership units and other compensation	—	%	0.54	%	1.45	%
Foreign income taxes	2.29	%	8.25	%	0.12	%
State and local income taxes	0.41	%	(0.63	)%	(0.19	)%
Valuation allowance impacting provision for income taxes	(0.26	)%	0.24	%	0.07	%
Other adjustments	(0.42	)%	0.14	%	(1.64	)%
Effective income tax rate⁽²⁾	3.97	%	8.69	%	11.03	%


(1)	Through December 31, 2019 the Company was organized as a series of pass through entities pursuant to the United States Internal Revenue Code. As such, the Company is not responsible for the tax liability due on certain income earned during the year. Such income is taxed at the unitholder and

non-controlling interest holder level, and any income tax is the responsibility of the unitholders and is paid at that level. The Conversion is effective January 1, 2020 and all income before provision for income taxes attributable to the Company is subject to U.S federal, state and local corporate income tax.

(2)

The effective income tax rate is calculated on income before provision for income taxes. The effective tax rate is impacted by a variety of factors, including, but not limited to, changes in the sources of income or loss during the period and whether such income or loss is attributable to the Company’s taxable subsidiaries.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of penalties and interest, is as follows:



	As of December 31,
	2019			2018			2017
	(Dollars in millions)
Balance at January 1	$	8.9		$	8.9		$	13.0
Additions for tax positions of prior years	1.9			0.2			1.6
Reductions due to lapse of statute of limitations	(0.7		)	(0.2		)	(5.7		)
Balance at December 31	$	10.1		$	8.9		$	8.9