Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

(13)Income Taxes

As a result of the IPO and the Transactions the Company owns a portion of the common units of the Operating Company, which is treated as a partnership for U.S. federal, and most applicable state and local income tax purposes. As a partnership, the Operating Company is generally not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by the Operating Company is passed through to and included in the taxable income or loss of its members in accordance with the terms of the Operating Agreement. The Company is subject to U.S. federal, state and local income taxes based on its share of the Operating Company’s pass-through taxable income.

The effective tax rate differs from the statutory tax rate primarily due to the Operating Company’s pass-through structure for U.S. income tax purposes.

For the year ended December 31, 2023, the Company did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

The following table details the Company’s provision for income taxes. Components of the provision for incomes taxes are as follows:

	Year ended December 31,
(in thousands)	2023			2022
Current tax:
U.S. Federal		(61	)		-
U.S. State and local		(47	)		-
	$	(108	)	$	-
Deferred tax:
U.S. Federal		71			-
U.S. State and local		16			-
	$	87		$	-
Valuation Allowance		—			—
Provision for income taxes	$	(21	)	$	-

The company had an effective tax rate of 0.19% for the year ended December 31, 2023. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate was as follows:

	Year ended December 31,
	2023			2022
Statutory U.S. federal income tax rate		21.00	%	$	-
State tax, net of federal benefits		0.22	%		-
Non-deductible expenses		0.02	%		-
Non-controlling interest		-20.44	%		-
Tax Credits		-0.61	%		-
State rate change		0.00	%		-
Change in valuation allowance		0.00	%		-
Effective tax rate		0.19	%	N/A

The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to income passed through to noncontrolling interests. Prior to the IPO, income taxes for GEN, LLC at the consolidated level were primarily state, and local minimum taxes. Subsequent to the IPO, the Company became a C Corporation subject to federal, state, and local income taxes with respect to its share of net taxable income of GEN, LLC.

Temporary differences and carryforward that give rise to deferred tax assets and liabilities are comprised of the following:

	Year ended December 31,
(in thousands)	2023		2022
Deferred tax assets:
Outside basis differences		12,608		-
State taxes		10		-
Gross deferred tax asset before valuation		12,618		-
Net deferred tax asset	$	12,618	$	-
Net Deferred tax liabilities	$	12,618	$	-

Tax Receivable Agreement (“TRA”)

GEN, Inc. entered into the TRA with the Operating Company and each of the members of the Operating

Company (the “Members”) that provides for the payment by GEN Inc. to the Members of 85% of the amount of tax benefits, if any, that the Company may actually realize (or in some circumstances are deemed to realize) as a result of (i) increases in tax basis resulting from any future redemptions that are funded by GEN Inc. or exchanges of Class A Common Units described above in “Note 1—Organization and Description of Business” and (ii) certain other tax benefits attributable to payments made under the TRA.

The annual tax benefits are computed by calculating the income taxes due including such tax benefits, and the income taxes due without such benefits. The Operating Company expects to benefit from the remaining 15% of any tax benefits that it may actually realize. The TRA payments are not conditioned upon any continued ownership interest in the Operating Company. The rights of each noncontrolling interest holder under the TRA are assignable to transferees of its interest in the Operating Company. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Operating Company generates each year and the applicable tax rate.

As of December 31, 2023, the Company did not have a liability related to its projected obligations under the TRA. During the year ended December 31, 2023, GEN Inc. did not make any payments to members of the Operating Company pursuant to the TRA.