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Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

(16)Income Taxes

 

The Company and its subsidiaries file income tax returns in the U.S. federal, and various states and foreign jurisdictions.

 

The Company assessed its uncertain tax positions and determined that it has no material uncertain tax position at December 31, 2021.

 

The components of income before income taxes consist of the following:

 

   Year ended December 31, 
   2021   2020   2019 
U.S. operations  $34,742   $9,577   $23,384 
Foreign operations   116,277    59,772    81,762 
                
   $151,019   $69,349   $105,146 

 

 

 

 

The provision for current and deferred income tax expense (benefit) consists of the following:

 

   Year ended December 31, 
   2021   2020   2019 
Current:            
Federal  $4,825   $1,685   $3,280 
State and local   518    90    713 
Foreign   36,164    17,024    27,412 
    41,507    18,799    31,405 
Deferred:               
Federal   4    (215)   (3)
State and local   11    44    (22)
Foreign   (530)   753    (2,304)
    (515)   582    (2,329)
Total income tax expense  $40,992   $19,381   $29,076 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

 

               
   December 31, 
   2021   2020 
Net deferred tax assets:          
Foreign net operating loss carry-forwards  $1,292   $360 
Inventory and accounts receivable   4,508    1,928 
Profit sharing   3,787    2,936 
Stock option compensation   732    718 
Effect of inventory profit elimination   5,112    4,443 
Other   407    910 
Total gross deferred tax assets, net   15,838    11,295 
Valuation allowance   (3,582)   (360)
Net deferred tax assets   12,256    10,935 
Deferred tax liabilities (long-term):          
Building expenses   (1,082)    
Trademarks and licenses   (2,551)   (2,894)
Unrealized gain on marketable equity securities   (436)    
Other   (251)    
Total deferred tax liabilities   (4,320)   (2,894)
Net deferred tax assets  $7,936   $8,041 

 

Valuation allowances have been provided for deferred tax assets relating to foreign net operating loss carry-forwards and reserves acquired in connection with the acquisition of Interparfums Italia srl, as future profitable operations from certain foreign subsidiaries might not be sufficient to realize the full amount of the deferred tax assets.

 

 

INTER PARFUMS, INC. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 31, 2021, 2020 and 2019

(In thousands except share and per share data)

 

No other valuation allowances have been provided as management believes that it is more likely than not that the asset will be realized in the reduction of future taxable income.

 

The Company estimated of the effect of global intangible low-taxed income (“GILTI”) and has determined that it has no tax liability related to GILTI as of December 31, 2021, 2020 and 2019. The Company also estimated the effect of foreign derived intangible income (“FDII”) and recorded a tax benefit of approximately $0.9 million, $0.3 million and $0.9 million as of December 31, 2021, 2020 and 2019, respectively.

 

French Tax Settlement

 

The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in and of itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part of the profits of that entity. In June 2021, a global settlement agreement was reached with the French Tax Authority whereby Interparfums SA paid in December 2021, €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. Interparfums SA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to Interparfums, SA by December 31, 2025.

 

The Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2017.

 

Differences between the United States federal statutory income tax rate and the effective income tax rate were as follows:

 

                       
   Year ended December 31, 
   2021   2020   2019 
Statutory rates   21.0%   21.0%   21.0%
State and local taxes, net of Federal benefit   0.3    0.2    0.6 
Windfall benefit from exercise of stock options   (0.9)   (0.6)   (0.7)
Benefit of Foreign Derived Intangible Income   (0.6)   (0.4)   (0.9)
Effect of foreign taxes greater than               
U.S. statutory rates   7.4    7.5    7.5 
Other   (0.1)   0.2    0.1 
Effective rates   27.1%   27.9%   27.6%

 

 

INTER PARFUMS, INC. AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

December 31, 2021, 2020 and 2019

(In thousands except share and per share data)