Hamilton Lane INCHLNE

Hamilton Lane INC Income Taxes Disclosure

10-KFiled May 30, 20253 min read
12. Income Tax

The Company’s income before income taxes consisted of the following:
Year Ended March 31,
202520242023
Domestic income before income taxes$353,992 $276,021 $236,198 
Foreign income before income taxes8,285 5,640 6,412 
Total income before income taxes$362,277 $281,661 $242,610 

Components of income tax expense consist of the following:
Year Ended March 31,
202520242023
Current:
Federal$27,768 $31,551 $28,829 
State and local5,619 4,395 5,075 
Foreign3,041 1,811 1,068 
Total current income tax expense
$36,428 $37,757 $34,972 
Deferred:
Federal$14,144 $13,148 $15,073 
State and local(1,760)3,556 4,694 
Foreign(303)(7)686 
Total deferred income tax expense
12,081 16,697 20,453 
Total income tax expense
$48,509 $54,454 $55,425 

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
Year Ended March 31,
202520242023
Federal tax at statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit1.2 %2.8 %3.4 %
Non-controlling interest(5.6)%(6.4)%(6.8)%
Valuation allowance(4.4)%1.6 %3.5 %
Other1.2 %0.3 %1.7 %
Effective tax rate13.4 %19.3 %22.8 %

The significant components of deferred tax assets and liabilities are as follows:
Year Ended March 31,
20252024
Deferred tax assets:
Basis difference in HLA$329,129 $293,824 
Tax Receivable Agreement57,255 57,636 
Fixed assets— 63 
Valuation allowance(79,432)(90,541)
State taxes394 141 
Other1,179 764 
Total deferred tax assets
$308,525 $261,887 

As of March 31, 2025 and 2024, the Company did not have net operating loss carryforwards.
In connection with the February 2025 Offering and related unit exchanges, the Company recorded a deferred tax asset in the amount of $58,700, which is net of a valuation allowance of $6,507, related to the portion of tax benefits that is more likely than not will not be realized. Additionally, in connection with recording of the deferred tax asset for the February 2025 Offering and related unit exchanges, the Company recorded a payable to related parties pursuant to the tax receivable agreement through equity of $49,029.

The Company believes it is more likely than not that the deferred tax assets (except those identified above) will be realized based on the Company’s forecasted income. The net change in the valuation allowance was a decrease of $11,109.

As of March 31, 2025, 2024, and 2023, the Company had no unrecognized tax positions. The Company does not expect any material increase or decrease in its gross unrecognized tax positions during the next twelve months. If and when the Company does record unrecognized tax positions in the future, any interest and penalties related to unrecognized tax positions will be recorded in the income tax expense line in the Consolidated Statements of Income.

The Company files income tax returns as required by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company may be subject to examination by federal and certain state and local tax authorities. As of March 31, 2025, the Company’s federal income tax returns from 2021 remain open and are subject to examination.

Tax Receivable Agreement

The Company has recorded a liability related to the tax receivable agreement of $240,648 and $201,422 as of March 31, 2025 and 2024, respectively. Payments of $11,924 and $11,123 were made during the years ended March 31, 2025 and 2024, respectively. In the event that the valuation allowance related to tax benefits associated with the tax receivable agreement is released in a future period, an additional estimated payable will be due to the TRA Recipients of $25,264.

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.

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