Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income taxes

18.Income taxes

The Company’s income before income taxes is comprised of the following for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	For the years ended December 31,
	2022			2021			2020
Domestic	$	(45,701	)	$	(80,658	)	$	(144,412	)
Foreign		154,023			143,015			191,240
Total		108,322			62,357			46,828

Income tax expense (benefit) is comprised of the following for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	For the years ended December 31,
	2022			2021			2020
Current
Domestic	$	1,322		$	2,281		$	—
Foreign		24,749			19,853			13,529
Total current		26,071			22,134			13,529
Deferred
Domestic		2,708			(27	)		—
Foreign		(453	)		(939	)		408
Total deferred		2,255			(966	)		408
Income tax expense	$	28,326		$	21,168		$	13,937

The provision for income taxes for the years ended December 31, 2022, 2021 and 2020 was $28.3 million, $21.2 million and $13.9 million, respectively. The increase was primarily attributable to the year-over-year change in the geographical distribution of income and the U.S. income tax incurred at the level of Excelerate Energy, Inc. beginning in April 2022 of $3.6 million for the year ended December 31, 2022.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is comprised of the following for the years ended December 31, 2022, 2021 and 2020:

	For the years ended December 31,
	2022			2021			2020
Statutory rate applied to pre-tax income		21.0	%		21.0	%		21.0	%
Foreign rate differential		12.0	%		8.5	%		1.6	%
Domestic non-controlled interest/ domestic non-taxable income		(20.1	%)		(20.9	%)		(21.0	%)
Early extinguishment of lease liability		4.2	%		0.0	%		0.0	%
Permanent items		(4.0	%)		(2.2	%)		(1.1	%)
Withholding taxes		13.7	%		22.9	%		28.4	%
Uncertain tax positions		(1.6	%)		2.8	%		0.0	%
Audit settlement		0.0	%		2.4	%		0.0	%
Foreign tax credit		(2.8	%)		0.0	%		0.0	%
Gain on tax liquidation		1.7	%		0.0	%		0.0	%
Other		2.0	%		(0.6	%)		0.9	%
Effective tax rate		26.1	%		33.9	%		29.8	%

The effective tax rate for the years ended December 31, 2022, 2021 and 2020 was 26.1%, 33.9% and 29.8%, respectively. The decrease was primarily driven by the geographical distribution of income and the varying tax regimes of jurisdictions. Our effective tax rate was also impacted by the reduction of income before tax due to the loss on early extinguishment of the lease liability on acquisition of the Excellence vessel without a corresponding tax benefit which increased our effective tax rate by 4.2% for the year ended December 31, 2022. Additionally, our effective tax rate was impacted by 3.3% for the year ended December 31, 2022 due to additional tax recorded since being subject to U.S. income taxes at the corporate level beginning in April 2022.

The tax effect of cumulative temporary differences and carryforwards that give rise to a significant deferred tax assets of liabilities as of December 31, 2022 and 2021 are as follows (in thousands):

	As of December 31,
	2022			2021
Deferred tax assets
Fixed assets	$	15		$	33
Net operating losses		218			518
Lease liabilities		21,315			40,632
Foreign tax credit carryforward		429			—
Amortizable transactions costs		1,231			—
Investment in partnership		44,556			—
Other		2,318			344
Deferred tax assets		70,082			41,527
Valuation allowances		(8,335	)		(496	)
Net deferred tax assets	$	61,747		$	41,031
Deferred tax liabilities
Right of use assets	$	21,415		$	39,004
Unrealized foreign exchange gains		465			1,088
Net deferred tax liabilities	$	21,880		$	40,092
Net deferred tax assets	$	39,867		$	939

The Company has foreign and U.S. corporate subsidiaries for which it records deferred taxes. The Company has $1.0 million of net operating loss carryforwards as of December 31, 2021. Of these, $0.5 million will expire between 2024 and 2028. The remaining net operating loss carryforwards have an unlimited carryforward period.

The Company recorded a valuation allowance to reflect the estimated amount of certain deferred tax assets that, more likely than not, will not be realized. In making such a determination, the Company evaluates a variety of factors, including the Company's operating history, accumulated deficit, and the existence of taxable or deductible temporary differences and reversal periods. The net change in the total valuation allowance for the years ended December 31, 2022 and 2021 was an increase of $7.8 million and a decrease of $0.5 million, respectively. The $7.8 million net increase in 2022 was primarily due to the U.S. federal deferred tax assets related to the investment in partnership and foreign tax credit carryforward. The $0.5 million net decrease in 2021 was primarily due to the utilization of prior year net operating loss carryforwards in foreign jurisdictions.

For the year ended December 31, 2022, the Company did not have any unrecognized tax benefits related to uncertain tax positions. The Company had unrecognized tax benefits of $1.4 million related to uncertain tax positions for the year ended December 31, 2021.

The Company recognizes the tax benefit from an uncertain tax provision only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the tax position. The Company’s policy is to recognize accrued interest and penalties related to uncertain tax positions in income tax expense in the consolidated financial statements. For the year ended December 31, 2022, the Company did not have any payments of interest and penalties associated with uncertain tax positions. The Company recorded $0.4 million in payments of interest and penalties associated with uncertain tax positions for the year ended December 31, 2021. The Company does not anticipate material changes in the total amount or composition of its unrecognized tax benefits within 12 months of the reporting date.

A reconciliation of the beginning and ending amount of unrecognized tax benefits in shown below (in thousands):

	2022			2021
Balance at January 1	$	1,388		$	—
Increases (decreases) related to prior year tax positions		(1,388	)		1,388
Balance at December 31		—			1,388

The Company and its subsidiaries file income tax returns in the United States, and various foreign, state and local jurisdictions. The Company is not currently under income tax examination in any jurisdiction. Tax years that remain subject to examination vary by legal entity but are generally open in the United States for the tax years ending after 2018 and outside the United States for the tax years ending after 2016.

Excelerate is a corporation for U.S. federal and state income tax purposes. EELP, is treated as a pass-through entity for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax at the entity level. Accordingly, unless

otherwise specified, the Company’s historical results of operations prior to the IPO do not include any provision for U.S. federal income tax for EELP.

The Company has international operations that are also subject to foreign income tax and U.S. corporate subsidiaries subject to U.S. federal tax. Therefore, its effective income tax rate is dependent on many factors, including the Company’s geographical distribution of income, a rate benefit attributable to the portion of the Company’s earnings not subject to corporate level taxes, and the impact of nondeductible items and foreign exchange impacts as well as varying tax regimes of jurisdictions. In one jurisdiction, the Company’s tax rate is significantly less than the applicable statutory rate as a result of a tax holiday that was granted. This tax holiday will expire in 2033 at the same time that our contract and revenue with our customer ends.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into U.S. law. Under this law, there is a new 15% corporate minimum tax, which did not have an impact on the Company’s tax provision for the year ended December 31, 2022. The Company does not expect other provisions of the new law to have a material impact on its tax provision.