TIPTREE INC

The following table presents the Company’s provision (benefit) for income taxes reflected as a component of income (loss):

On June 21, 2022, the WP Transaction was completed, in which Warburg invested $200,000 in Tiptree’s insurance subsidiary, Fortegra. The WP Transaction, along with Fortegra management’s ownership, reduced Tiptree’s ownership in Fortegra below 80% such that, while still consolidated for GAAP financial reporting purposes, Fortegra will no longer be included in the consolidated tax return group with Tiptree. Tiptree recorded deferred tax liabilities related to the basis difference in Tiptree’s investment in Fortegra as of December 31, 2022. This deferred tax liability represents the tax that would be due, before consideration of loss carryforwards, if Tiptree were to sell any of its Fortegra stock at its carrying value on the Company’s balance sheet. The deferred tax liability as of December 31, 2022 relating to the WP Transaction was $39,970, of which $14,064 was recorded directly in stockholders’ equity, a benefit of $2,424 in other comprehensive income and $28,330 as a provision for income taxes in the consolidated statements of operations for the year ended December 31, 2022. Additional one time impacts from the transaction caused $4,803 of expense, leading to $33,133 of expense in the statement of operations.

For the year ended December 31, 2023, the deferred tax liability relating to Fortegra was $61,673, an increase of $21,703, of which $3,819 of expense was recorded in OCI, $1,217 of benefit was recorded directly in stockholders’ equity, and $19,101 expense was recorded as a provision for income taxes.

Excluding the impact of these deferred taxes, the effective tax rates for the years ended December 31, 2023 and 2022, were 28.8% and 32.1%, respectively.

The U.S. federal rate is before the consideration of rate reconciling items. A reconciliation of the expected federal provision (benefit) for income taxes on income using the federal statutory income tax rate to the actual provision (benefit) for income taxes and resulting effective income tax rate is as follows for the periods indicated below:

For the year ended December 31, 2023, the Company’s effective tax rate on income was equal to 51.8%. The effective tax rate for the year ended December 31, 2023 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of the tax deconsolidation of Fortegra and non-deductible compensation.

For the year ended December 31, 2022, the Company’s effective tax rate on income was equal to 93.4%. The effective tax rate for the year ended December 31, 2022 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of the tax deconsolidation of Fortegra and non-deductible compensation.

For the year ended December 31, 2021, the Company’s effective tax rate on losses was equal to 32.6%. The effective tax rate for the year ended December 31, 2021 is higher than the U.S. statutory income tax rate of 21.0% primarily from the impact of expected refunds arising from the CARES Act.

The table below presents the components of the Company’s net deferred tax assets and liabilities as of the respective balance sheet dates:

As of January 2016, Tiptree established a U.S. federal consolidated income tax group and filed on a consolidated basis, with limited exceptions. As of June 2022, Fortegra and its subsidiaries are no longer part of Tiptree’s consolidated income tax group and formed their own tax consolidation group. Tiptree’s consolidated group, and certain subsidiaries on a separate basis, filed returns in various state jurisdictions, and as such may have state tax obligations. Additionally, as needed the Company will take all necessary steps to comply with any income tax withholding requirements.

As of December 31, 2023, the Company had total U.S. Federal net operating loss carryforwards (NOLs) of $51,099. The following table presents the U.S. Federal NOLs by tax year of expiration:

In addition to the U.S. Federal NOL, Tiptree and its subsidiaries have NOLs in various state jurisdictions totaling $19,757 as of December 31, 2023. Valuation allowances of $12,366 have been established for primarily state deferred tax assets, which are primarily state NOLs, since management has concluded it is more likely than not they will expire unutilized based on existing positive and negative evidence. Management believes it is more likely than not the remaining NOLs and deferred tax assets will be utilized prior to their expiration dates.

As of December 31, 2023, the consolidated valuation allowance for the Company was $12,366. In 2023, the Company recorded a net increase in its valuation allowances equal to $518, compared to a net increase in its valuation allowance of $3,285 in 2022.

As of December 31, 2023 and 2022, the Company hadno material unrecognized tax benefits or accrued interest and penalties. Federal tax years 2015 and onward are open for examination as of December 31, 2023.