Artisan Partners Asset Management Inc.APAM
Artisan Partners Asset Management Inc. Income Taxes Disclosure
Note 11. Income Taxes and Related Payments
APAM is subject to U.S. federal, state and local income taxation on APAM’s allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries.
Income (or loss) from continuing operations before income tax expense disaggregated between domestic and foreign:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 485,936 | $ | 437,532 | $ | 380,052 | |||||||||||
| Foreign | 3,196 | 3,020 | 3,640 | ||||||||||||||
| Total | $ | 489,132 | $ | 440,552 | $ | 383,692 | |||||||||||
Components of the provision for income taxes consist of the following:
| For the Years Ended December 31, | |||||||||||||||||
| Current: | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 42,686 | $ | 35,838 | $ | 21,776 | |||||||||||
| State and local | 11,934 | 10,581 | 6,580 | ||||||||||||||
| Foreign | 921 | 303 | 1,036 | ||||||||||||||
| Total | 55,541 | 46,722 | 29,392 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 47,359 | 37,517 | 36,128 | ||||||||||||||
| State and local | 8,353 | 6,662 | 6,368 | ||||||||||||||
| Total | 55,712 | 44,179 | 42,496 | ||||||||||||||
| Income tax expense | $ | 111,253 | $ | 90,901 | $ | 71,888 | |||||||||||
During the fiscal year ended December 31, 2025, the Company adopted ASU 2023-09 to enhance income tax disclosure relating to income taxes paid and the reconciliation of rates. The income taxes paid by the Company are as follows:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 44,831 | $ | 33,029 | $ | 23,193 | |||||||||||
| State and local | 11,751 | 8,944 | 7,098 | ||||||||||||||
| Foreign | 448 | 746 | 433 | ||||||||||||||
| Total | $ | 57,030 | $ | 42,719 | $ | 30,724 | |||||||||||
Income taxes paid (net of refunds) exceeds 5 percent of total income taxes paid in the following jurisdictions:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| State and local: | |||||||||||||||||
New York City (1) | 2,696 | 1,796 | 1,722 | ||||||||||||||
| Total | $ | 2,696 | $ | 1,796 | $ | 1,722 | |||||||||||
(1) New York City income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid for the year ended December 31, 2023. For comparative purposes, we have also included the taxes paid for the years ended December 31, 2025 and 2024. | |||||||||||||||||
The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows:
| For the Years Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||||
| U.S. federal statutory rate | $ | 102,718 | 21.0 | % | $ | 92,516 | 21.0 | % | $ | 80,575 | 21.0 | % | ||||||||||||||
Current state and local income taxes, net of federal income tax effect (1) (2) | 18,098 | 3.7 | 14,093 | 3.2 | 11,926 | 3.1 | ||||||||||||||||||||
| Foreign tax effects | 250 | — | (331) | (0.1) | 272 | 0.1 | ||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | ||||||||||||||||||||||||||
OBBBA adjustment (2) | 9,076 | 1.9 | — | — | — | — | ||||||||||||||||||||
| Effect of cross-border tax laws | 781 | 0.2 | 1,053 | 0.2 | 848 | 0.2 | ||||||||||||||||||||
| Tax credits | (1) | — | — | — | — | — | ||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||
Rate benefit from noncontrolling interest (3) | (18,484) | (3.8) | (18,932) | (4.3) | (18,886) | (4.9) | ||||||||||||||||||||
| Limits on executive compensation | 2,780 | 0.6 | 5,039 | 1.1 | 2,199 | 0.6 | ||||||||||||||||||||
| Excess tax benefits on share-based compensation | (4,525) | (0.9) | (3,934) | (0.9) | (2,909) | (0.8) | ||||||||||||||||||||
| Other | 302 | — | 131 | 0.1 | (2,166) | (0.6) | ||||||||||||||||||||
| Changes in unrecognized tax benefits | 258 | — | 1,266 | 0.3 | 29 | — | ||||||||||||||||||||
| Effective tax rate | $ | 111,253 | 22.7 | % | $ | 90,901 | 20.6 | % | $ | 71,888 | 18.7 | % | ||||||||||||||
(1) State and local taxes in New York City, California and New York made up the majority (greater than 50 percent) of the tax effect in this category. | ||||||||||||||||||||||||||
(2) As a result of the enactment of the One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025, the Company recorded a $10.7 million deferred tax charge upon remeasuring deferred tax assets related to new compensation deduction limitation rules effective for the Company starting in 2027. Of the total $10.7 million deferred tax charge, $9.1 million is associated with federal income taxes with the remaining $1.6 million related to state and local. | ||||||||||||||||||||||||||
(3) For the years ended December 31, 2025, 2024 and 2023 approximately 14%, 14% and 16%, respectively, of Artisan Partners Holdings’ taxable earnings were attributable to other partners and not subject to corporate-level taxes. | ||||||||||||||||||||||||||
In connection with the IPO, APAM entered into two tax receivable agreements (“TRAs”). The first TRA, generally provides for the payment by APAM to a private equity fund (the “Pre-H&F Corp Merger Shareholder”) or its assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes (or is deemed to realize in certain circumstances) as a result of (i) the tax attributes of the preferred units APAM acquired in the merger of a wholly-owned subsidiary of the Pre-H&F Corp Merger Shareholder into APAM in March 2013 and (ii) tax benefits related to imputed interest.
The second TRA generally provides for the payment by APAM to current or former limited partners of Holdings or their assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes (or is deemed to realize in certain circumstances) as a result of (i) certain tax attributes of their partnership units sold to APAM or exchanged (for shares of Class A common stock, convertible preferred stock or other consideration) and that are created as a result of such sales or exchanges and payments under the TRAs and (ii) tax benefits related to imputed interest. Under both agreements, APAM generally will retain the benefit of the remaining 15% of the applicable tax savings.
For purposes of the TRAs, cash savings of income taxes are calculated by comparing APAM’s actual income tax liability to the amount it would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRAs, unless certain assumptions apply. The TRAs will continue in effect until all such tax benefits have been utilized or expired, unless APAM exercises its right to terminate the agreements or payments under the agreements are accelerated in the event that APAM materially breaches any of its material obligations under the agreements.
The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending upon a number of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the Class A common stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and timing of the taxable income APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments under the TRAs constituting imputed interest or depreciable basis or amortizable basis.
Payments under the TRAs, if any, will be made pro rata among all TRA counterparties entitled to payments on an annual basis to the extent APAM has sufficient taxable income to utilize the increased depreciation and amortization charges and imputed interest deductions. Artisan expects to make one or more payments under the TRAs, to the extent they are required, prior to or within 125 days after APAM’s U.S. federal income tax return is filed for each fiscal year. Interest on the TRA payments will accrue from the due date (without extension) of such tax return until such payments are made.
Amounts payable under the TRAs are estimates which may be impacted by factors, including but not limited to, expected tax rates, projected taxable income and projected ownership levels and are subject to change. Changes in the estimates of amounts payable under tax receivable agreements are recorded as non-operating income (loss) in the Consolidated Statements of Operations.
The change in the Company’s deferred tax assets related to the tax benefits described above and the change in corresponding amounts payable under the TRAs for the years ended December 31, 2025 and 2024 is summarized as follows:
| Deferred Tax Asset - Amortizable Basis | Amounts Payable Under TRAs | ||||||||||
| December 31, 2023 | $ | 384,423 | $ | 364,048 | |||||||
2024 Holdings Common Unit Exchanges | 15,963 | 13,568 | |||||||||
| Amortization | (45,608) | — | |||||||||
Payments under TRAs (1) | — | (36,659) | |||||||||
| Change in estimate | (5) | 504 | |||||||||
| December 31, 2024 | $ | 354,773 | $ | 341,461 | |||||||
2025 Holdings Common Unit Exchanges | 882 | 750 | |||||||||
| Amortization | (47,642) | — | |||||||||
Payments under TRAs (1) | — | (38,286) | |||||||||
| Change in estimate | 2 | (557) | |||||||||
| December 31, 2025 | $ | 308,015 | $ | 303,368 | |||||||
(1) Interest payments of $0.3 million were paid in addition to these TRA payments for each of the years ended December 31, 2025 and 2024. | |||||||||||
Net deferred tax assets comprise the following:
| As of December 31, 2025 | As of December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Amortizable basis (1) | $ | 308,015 | $ | 354,773 | |||||||
Other (2) | 46,687 | 54,613 | |||||||||
| Total deferred tax assets | 354,702 | 409,386 | |||||||||
Less: valuation allowance (3) | — | — | |||||||||
| Net deferred tax assets | $ | 354,702 | $ | 409,386 | |||||||
(1) Represents the unamortized step-up of tax basis and other tax attributes from the merger and partnership unit sales and exchanges described above. These future tax benefits are subject to the TRA agreements. | |||||||||||
(2) Represents the net deferred tax assets associated with Artisan’s investment in Holdings, related primarily to incentive compensation plan deduction timing differences. These future tax benefits are not subject to the TRA agreements. The decrease in the year ended December 31, 2025, is predominantly associated with the $10.7 million charge associated with the enactment of the OBBBA. | |||||||||||
(3) Artisan assessed whether the deferred tax assets would be realizable and determined based on its history of taxable income that the benefits would more likely than not be realized. Accordingly, no valuation allowance is required. | |||||||||||
Accounting standards establish a minimum threshold for recognizing, and a process for measuring, the benefits of income tax return positions in financial statements. The change in the Company’s gross unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 is summarized as follows:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of year | $ | 1,576 | $ | 173 | $ | 147 | |||||||||||
| Additions for tax positions of prior years | — | 1,219 | — | ||||||||||||||
| Reductions for tax positions of prior years | (43) | (27) | — | ||||||||||||||
| Tax positions related to the current year | 283 | 211 | 26 | ||||||||||||||
| Settlements with taxing authorities | — | — | — | ||||||||||||||
| Balance at end of year | $ | 1,816 | $ | 1,576 | $ | 173 | |||||||||||
If recognized, $1.7 million and $1.4 million of the benefits recorded as of December 31, 2025 and 2024, respectively, would favorably impact the effective tax rate in future periods.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Accrued interest on uncertain tax positions was $0.3 million and $0.2 million as of December 31, 2025 and 2024, respectively, and is excluded from the unrecognized tax benefits total above. The gross unrecognized tax benefit is recorded within accounts payable, accrued expenses and other in the Company's Consolidated Statements of Financial Condition.
In the normal course of business, Artisan is subject to examination by federal and certain state, local and foreign tax regulators. As of December 31, 2025, U.S. federal income tax returns filed for the years 2022 through 2024 are open and therefore subject to examination. State, local and foreign income tax returns filed are generally subject to examination from 2021 to 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 25, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.