Note 17 - Income Taxes |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Text Block] |
17. INCOME TAXES
Cohen & Company Inc. is treated as a “C” corporation for United States federal income tax purposes. A U.S. C corporation is subject to a federal tax rate of 21%. The Company's effective tax rate is significantly different than this rate for the following reasons.
1. Cohen & Company Inc. consolidates the Operating LLC but only owns a minority economic interest in the Operating LLC. For the six months ended June 30, 2025, Cohen & Company Inc. owned 29.5% of the economic interests of the Operating LLC (on average) and was allocated the same percentage of income/(loss) generated by the Operating LLC. To the extent Cohen & Company Inc. incurs tax obligations on this, the related tax expense is recognized in these consolidated financial statements. The remaining 70.3% that is allocated to the non-controlling members of the Operating LLC is subject to taxation on such members' tax returns.
2. The Operating LLC itself consolidates certain pass-through entities. Therefore, the income/(loss) of these entities is included in the Company's consolidated results but no tax expense/(benefit) related to the unowned portion is included.
3 There are state, local, and foreign taxes to which the Operating LLC or its subsidiaries are subject to, which are included in the effective tax rate.
4. The Company also has valuation allowances applied against its carryforward NOL and NCL deferred tax assets as well as its tax over book basis in the Operating LLC. Valuation allowances are applied to deferred tax assets when management determines that the assets may not be fully realized. This determination requires significant judgement and is primarily based on management's expectations regarding the generation of future taxable income. ASC 740 indicates that all available evidence should be considered when assessing the need for and the appropriate level of a valuation allowance. All available evidence includes historical information supplemented by all currently available information about future periods.
The following table presents the components on the Company's consolidated provision for income tax for the periods presented.
The Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025. The only provisions of the OBBBA that directly impact the Company are: (i) changes in bonus depreciation and (ii) changes in the calculation of the amount of net interest expense that is deductible. In both cases, the impact to the Company will be immaterial. The OBBBA made significant changes to individual income taxes including the taxation of overtime and tips that may impact certain company's workforces thereby having an indirect effect on these companies. However, none of the Company's employees receive tips and the Company has an immaterial number of hourly employees.
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