Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.2
Income Taxes
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
20.
Income Taxes
The components of income tax expense (benefit) were as follows:
 
 
  
For the three

months ended
June 30, 2022
 
 
For the six

months ended
June 30, 2022
 
 
For the three

months ended
June 30, 2021
 
 
For the three

months ended
March 31, 2021
 
 
  
Successor
 
 
Predecessor
 
Net income (loss) before income taxes
   
$
(168,763
) 
  
$
(246,093
) 
   $ (13,738 )    $ 125,457  
Provision (benefit) for income taxes
   
 
(940
) 
  
 
(14,275
) 
     1,086       1,137  
Effective tax provision rate
   
 
0.56
% 
  
 
5.80
% 
     (7.91 )%      0.91 % 

The Company’s effective tax rate for the three and six months ended June 30, 2022 differs from the U.S.’s statutory rate primarily due to anticipated state statutory income tax rates as well as the projected mix of earnings or loss attributable to the noncontrolling interest not allocable to FoA. Prior to the Business Combination, FoA Equity operated as a U.S. Partnership which, generally, are not subject to U.S. federal and state income taxes.

After the Business Combination, FoA is taxed as a corporation and is subject to U.S. federal, state and local taxes on the income allocated to it from FoA Equity, based upon FoA’s economic interest in FoA Equity, as well as any stand-alone income it generates. FoA Equity and its disregarded subsidiaries are treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, FoA Equity is not subject to U.S. federal and certain state and local income taxes. FoA Equity’s members, including FoA, are liable for U.S. federal, state and local income taxes based on their allocable share of FoA Equity’s pass-through taxable income.

FoA Equity wholly owns certain regarded corporate subsidiaries for tax purposes. FoA Equity’s regarded corporate subsidiaries are subject to U.S. federal, state and local taxes on income they generate. As such, the consolidated tax provision of FoA includes corporate taxes that it incurs based on its flow-through income from FoA Equity as well as its allocable portion of corporate taxes that are incurred by its regarded subsidiaries.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations.

The Company recognizes uncertain income tax positions when it is not more-likely-than-not a tax position will be sustained upon examination. As of June 30, 2022, the Company has recognized uncertain tax positions related to positions taken at FoA and lower tier subsidiaries. There were no significant changes to the Company’s uncertain tax positions for the current period. If necessary, the Company accrues interest and penalties related to uncertain tax positions as a component of the income tax
provision.
No
interest or penalties were recognized in income tax expense for the Successor three and six months ended June 30, 2022, three months ended June 30, 2021, or the Predecessor three months ended March 31, 2021. Tax positions taken in tax years that remain open under the statute of limitations will be subject to examinations by tax authorities. With few exceptions, the Company is no longer subject to state or local examinations by tax authorities for tax years ended December 31, 2017
or prior.