Income Taxes

12 Months Ended

Nov. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income tax expense consists of the following components (in thousands):

	Year Ended November 30,
	2022		2021		2020
Current:
U.S. Federal	$	198,507	$	322,551	$	90,350
U.S. state and local	67,236		70,370		68,261
Foreign	78,505		86,918		75,395
Total current	344,248		479,839		234,006
Deferred:
U.S. Federal	(61,303)		72,753		52,765
U.S. state and local	(17,010)		19,502		(1,288)
Foreign	7,917		4,635		13,190
Total deferred	(70,396)		96,890		64,667
Total income tax expense	$	273,852	$	576,729	$	298,673

The following table presents the U.S. and non-U.S. components of earnings before income tax expense (in thousands):

	Year Ended November 30,
	2022		2021		2020
U.S.	$	801,047	$	1,970,625	$	813,305
Non-U.S. (1)	254,515		283,480		253,778
Earnings before income tax expense	$	1,055,562	$	2,254,105	$	1,067,083

(1)For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S.

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate of 21.0% to earnings before income taxes as a result of the following (dollars in thousands):

	Year Ended November 30,
	2022				2021				2020
	Amount		Percent		Amount		Percent		Amount		Percent
Computed expected federal income taxes	$	221,668	21.0	%	$	473,362	21.0	%	$	224,087	21.0	%
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of Federal income tax benefit	47,364		4.5		96,884		4.3		45,457		4.3
International operations (including foreign rate differential)	18,711		1.8		18,073		0.8		13,155		1.2
Non-deductible executive compensation	12,596		1.2		20,359		0.9		12,814		1.2
Foreign tax credits, net	(20,368)		(1.9)		(13,963)		(0.6)		(8,654)		(0.8)
Employee share-based awards	(37,988)		(3.6)		893		—		209		—
Regulatory Settlement	20,184		1.9		—		—		—		—
Change in unrecognized tax benefits related to prior years	(16,915)		(1.7)		(27,374)		(1.2)		(4,522)		(0.5)
Interest on unrecognized tax benefits	13,902		1.3		8,651		0.4		15,600		1.5
Other, net	14,698		1.4		(156)		—		527		0.1
Total income tax expense	$	273,852	25.9	%	$	576,729	25.6	%	$	298,673	28.0	%

The following table presents a reconciliation of gross unrecognized tax benefits (in thousands):

	Year Ended November 30,
	2022		2021		2020
Balance at beginning of period	$	339,036	$	314,347	$	260,138
Increases based on tax positions related to the current period	30,690		50,079		41,114
Increases based on tax positions related to prior periods	5,902		3,490		22,328
Decreases based on tax positions related to prior periods	(25,673)		(24,180)		(8,966)
Decreases related to settlements with taxing authorities	—		(4,700)		(267)
Balance at end of period	$	349,955	$	339,036	$	314,347

The total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax rate was $276.5 million and $267.8 million (net of Federal benefit) at November 30, 2022 and 2021, respectively.

We recognize interest accrued related to unrecognized tax benefits and penalties, if any, as components of Income tax expense. Net interest expense related to unrecognized tax benefits was $18.6 million, $10.8 million and $19.9 million for the years ended November 30, 2022, 2021 and 2020, respectively. At November 30, 2022, 2021 and 2020, we had interest accrued of approximately $116.5 million, $97.9 million and $87.1 million, respectively, included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition. No material penalties were accrued for the years ended November 30, 2022, 2021 and 2020.

The cumulative tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):

	November 30,
	2022		2021
Deferred tax assets:
Compensation and benefits	$	250,096	$	187,818
Operating lease liabilities	133,250		135,862
Long-term debt	47,535		65,037
Accrued expenses and other	166,564		178,451
Investments in associated companies	11,931		1,135
Sub-total	609,376		568,303
Valuation allowance	(6,266)		(11,922)
Total deferred tax assets	603,110		556,381
Deferred tax liabilities:
Operating lease right-of-use assets	118,567		126,150
Amortization of intangibles	62,670		62,123
Other	34,011		40,561
Total deferred tax liabilities	215,248		228,834
Net deferred tax asset, included in Other assets	$	387,862	$	327,547

The valuation allowance represents the portion of our deferred tax assets for which it is more likely than not that the benefit of such items will not be realized. We believe that the realization of the net deferred tax asset of $387.9 million at November 30, 2022 is more likely than not based on expectations of future taxable income in the jurisdictions in which we operate.

At November 30, 2022, we had gross net operating loss carryforwards of $10.2 million, primarily related to various state and local jurisdictions. This balance has been partially offset by a valuation allowance of $4.5 million. The remaining valuation allowance is attributable to deferred tax assets related to compensation and benefits in the U.K.

We are currently under examination by a number of taxing jurisdictions. Though we do not expect that resolution of these examinations will have a material effect on our consolidated financial position, they may have a material impact on our consolidated results of operations for the period in which resolution occurs. It is reasonably possible that, within the next twelve months, statutes of limitation will expire which would have the effect of reducing the balance of unrecognized tax benefits by $26.3 million.

The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we operate:

Jurisdiction	Tax Year
United States	2019
New York State	2001
New York City	2006
United Kingdom	2021
Germany	2017
Hong Kong	2016
India	2010

We will recognize any U.S. income tax expense we may incur on global intangible low-taxed income as income tax expense in the period in which the tax is incurred.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. The Inflation Reduction Act of 2022 includes a 15% corporate alternative minimum tax (“AMT”) and a one percent excise tax on net stock repurchases. The corporate AMT applies to corporations with average annual profits over $1 billion and is calculated on their financial statement income, with certain adjustments, and will apply to our tax year beginning December 1, 2023. The one percent excise tax on net stock repurchases is effective January 1, 2023. We do not expect that these changes will have a significant effect on our future effective tax rate, but we will continue to evaluate the nature and monitor the extent of the potential impacts.