v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXESA reconciliation of the statutory federal income tax expense to the income tax expense from continuing operations provided is as follows:
For the year ended December 31,
202220212020
Income tax expense at the federal statutory rate$196,400 $331,431 $710,842 
Income attributable to non-controlling interest(186,931)(308,995)— 
Income attributable to pass-through members— — (710,842)
Other(6,658)(12,595)2,450 
Total income tax expense $2,811 $9,841 $2,450 

Income taxes for the Company at the consolidated level are primarily federal, state, and local taxes. The following table details the Company's provision for income taxes for the years ended December 31, 2022, 2021 and 2020.

For the year ended December 31,
202220212020
Current income tax expense:
Federal$(118)$73 $— 
State(569)1,424 2,450 
Total current income tax expense(687)1,497 2,450 
Deferred income tax expense:
Federal3,916 7,494 — 
State(418)850 — 
Total deferred income tax expense3,498 8,344 — 
Total provision for income taxes$2,811 $9,841 $2,450 

The Company’s income tax expense varies from the expense that would be expected based on statutory rates due primarily to its past and current organizational structure. Prior to the business combination transaction, UWM, as a limited liability company ("LLC"), was not directly subject to taxes on its net taxable income. Rather, UWM's net taxable income was passed through to its members and included in its members' tax returns. A provision for state income taxes was required for certain state and local tax jurisdictions where UWM is a taxable entity.
Following the closing of the Business Combination Agreement, UWM is treated as single member LLC owned by Holdings LLC. As a single member LLC, all taxable income or loss generated by UWM will pass through and be included in the income or loss of Holdings LLC. Holdings LLC is treated as a partnership for federal and most state and local income tax jurisdictions. As a partnership, Holdings LLC is not subject to U.S. federal or most state and local incomes taxes. Any taxable income or loss generated by Holdings LLC after the Company’s acquisition of its portion of Holdings LLC is passed through and included in the taxable income or loss of its members, including the Company. The Company is a C Corporation and is subject to U.S. federal, state and local income taxes with respect to its attributable share of any taxable income of Holdings LLC. Pursuant to the Holdings LLC Second Amended & Restated Limited Liability Company Agreement, Holdings LLC will generally be required to make pro-rata distributions in cash to the Company and to SFS Corp. in amounts sufficient to cover the expected taxes resulting from their allocable share of the taxable income of Holdings LLC.
Deferred Tax Assets and Liabilities
Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. The company's deferred tax assets (liabilities) arise from the following components of temporary differences and carryforwards:
December 31,
20222021
Deferred tax assets:
Net operating losses$17,775 $10,831 
Other483 104 
Total deferred tax assets18,258 10,935 
Deferred tax liabilities:
Investment in partnership(54,589)(40,817)
Other— (2,502)
Total deferred tax liabilities(54,589)(43,319)
Net deferred tax liabilities$(36,331)$(32,384)
As of December 31, 2022, the Company has a deferred tax asset of $18.3 million and a deferred tax liability of $54.6 million, the net of which is included in accounts payable, accrued expenses and other. This deferred tax liability relates primarily to the difference in tax and book basis of the Company's investment in Holdings LLC. 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.
Of the total deferred tax assets, $17.8 million relates to the net operating loss carryforwards at December 31, 2022, $1.4 million of which will expire between 2032 and 2042 and $16.4 million has no expiration.
The Company reserves for uncertain income tax positions when it is not more-likely-than-not a tax position will be sustained upon examination. As the Company has no unrecognized tax benefits, no interest or penalties were recognized in income tax expense. The Company may be subject to potential examination by U.S. federal or state jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal or state tax laws.
The Company is subject to taxation in the U.S. and various state and local tax jurisdictions. As of December 31, 2022, tax years 2019 and forward are subject to examination by the tax authorities.
Tax Receivable Agreement
Holdings LLC intends to make an election under Section 754 of the Internal Revenue Code (the "Code") for the first taxable year in which a redemption or exchange of LLC Interests occurs. Pursuant to Holdings LLC’s election under Section 754 of the Code, the Company expects to obtain an increase in its share of the tax basis in the net assets of Holdings LLC when LLC Interests are redeemed or exchanged by SFS Corp. The Company intends to treat any exchanges of LLC Interests by SFS Corp. as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

In connection with the business combination transaction, the Company entered into the Tax Receivable Agreement with SFS Corp. that will provide for the payment by the Company to SFS Corp. of 85% of the amount of tax benefits, if any, that the Company actually realizes (or in some circumstances is deemed to realize) as a result of (1) the Company’s allocable share of existing tax basis acquired in connection with the Transactions (including the Company’s share of existing tax basis) and increases to such allocable share of existing tax basis; (2) increases in tax basis resulting from (a) the Company’s purchase of LLC Interests directly from Holdings LLC, (b) future exchanges (or deemed exchanges in certain circumstances) of LLC Interests for Class A common stock or cash, and (c) certain distributions (or deemed distributions) by Holdings LLC; and (3) certain additional tax benefits arising from payments made under the Tax Receivable Agreement. The Company may additionally benefit or retain the remaining 15% of any tax benefits that the Company actually realizes.

The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of the Company in the future. As of December 31, 2022 and December 31, 2021, the Company had recognized a liability of $17.1 million and $13.9 million, respectively, included in accounts payable, accrued expenses and other, related to the Tax Receivable Agreement arising from the business combination transaction and subsequent sales of certain assets. No payments were made to SFS Corp. pursuant to the Tax Receivable Agreement during the years ended December 31, 2022 or December 31, 2021.