18. Income Taxes

The Company is taxed as a corporation for income tax purposes and is subject to federal, state, and local taxes with respect to its allocable share of any net taxable income from the LLC. The LLC is a limited liability company taxed as a partnership for income tax purposes, and its taxable income or loss is passed through to its members, including the Company. The LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, and on the taxable income of its U.S. corporate subsidiaries. The year ended December 31, 2021 includes a period prior to the Organizational Transactions and IPO, during which time income taxes represented those only of the LLC.

The effective tax rates are different from the 21% U.S. federal statutory tax rate primarily because the Company was taxed as an LLC pre-IPO and, post-IPO, is not liable for income taxes on the portion of earnings that is attributable to the non-controlling interests. Additionally, the effective tax rate for the years ended December 31, 2023 and 2022 was lower than the 21% statutory rate as a result of the change in the deferred income tax rates and equity-based compensation. The increase in the Company’s effective tax rate for the year ended December 31, 2023 was primarily a result of the $18.4 million non-cash deferred income tax expense from the Common Control Reorganizations (“CCRs”), which are described below.

As of December 31, 2023, the Company had $4.9 million of federal net operating loss (“NOL”) carryforwards with an indefinite carryforward period, $6.3 million of state NOL carryforwards that will begin to expire in 2032, and $1.5 million in U.K. NOL carryforwards with an indefinite carryforward period. The company has recorded a full valuation allowance against the U.K. NOL.

As of December 31, 2023, the Company had $2.9 million in foreign tax credit carryforwards that will begin to expire in 2031. The Company assessed the available positive and negative evidence, including tax planning strategies and recent results of foreign operations, to determine whether it was more likely than not that the existing deferred tax asset would be realized. A significant piece of objective negative evidence evaluated was the inability to use all available foreign tax credits for the year ended December 31, 2023. On the basis of this evaluation, as of December 31, 2023, a full valuation allowance of $2.9 million was recorded with respect to this deferred tax asset. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of the Company’s ability to use the available foreign tax credits change.

Uncertain Tax Positions

The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits as of December 31, 2023, that if recognized, would affect the annual effective tax rate. The Company’s 2021 and 2022 tax years are considered open for federal examination purposes. The 2019 through 2022 tax years are considered open for purposes of federal examination under the statutes of limitations for the LLC, which continues to file an annual U.S. Return of Partnership Income, and the Company’s C-Corporation subsidiaries. As of the issuance date of this Form 10-K, the LLC is currently under U.S. federal

examination for the 2021 tax year and one of the LLC’s subsidiaries is currently under U.S. federal and state examination for the 2020 tax year. There are no other on-going U.S. federal, state, or foreign tax audits or examinations as of the date of issuance of this Form 10-K.

Common Control Reorganizations (CCRs)

Subsequent to the acquisitions of Socius and AccuRisk, which were purchased by a wholly owned subsidiary of Ryan Specialty Holdings, Inc., the Company converted Socius to an LLC and reorganized AccuRisk and transferred those LLCs to Ryan Specialty, LLC. These legal entity reorganizations were considered transactions between entities under common control. The CCRs resulted in a net, non-cash deferred income tax expense of $18.4 million. Additionally, the difference between the carrying value and the fair value of the investments transferred under common control resulted in an increase of $18.9 million to Non-controlling interests on the Consolidated Statements of Stockholders’ Equity during the year ended December 31, 2023.

Deferred Taxes

The change in Deferred tax assets during the year ended December 31, 2023 was primarily the result of a reduction to the deferred tax assets from the CCRs of $77.0 million offset by an increase in the Company’s investment in the LLC’s deferred tax assets of $63.9 million related to exchanges of LLC Common Units for Class A common stock, including the impact of the change in the deferred tax rate. During the year ended December 31, 2022, the Company recognized an increase in its investment in the LLC’s deferred tax assets of $27.7 million due to exchanges of LLC Common Units for Class A common stock.

As of December 31, 2023, the Company concluded that, based on the weight of all available positive and negative evidence, the deferred tax assets with respect to the Company’s basis difference in its investment in the LLC, start-up costs, and U.S. net operating losses are more likely than not to be realized. As such, no valuation allowance has been recognized against those deferred tax assets. The Company has recorded a full valuation allowance against its foreign tax credits and U.K. NOL. The valuation allowance will be maintained until there is sufficient evidence to support the reversal of all or some portion of this allowance.

Tax Receivable Agreement (TRA)

The Company recognizes a liability on the Consolidated Balance Sheets based on the undiscounted estimated future payments under the TRA. The amounts payable under the TRA will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of the Company in the future. Based on current projections, the Company anticipates having sufficient taxable income to be able to realize the benefits and has recorded Tax Receivable Agreement liabilities of $358.9 million related to

these benefits on the Consolidated Balance Sheets as of December 31, 2023. The following summarizes activity related to the Tax Receivable Agreement liabilities:

The increases in the TRA liabilities due to exchanges of LLC Common Units for Class A common stock were recognized in Additional paid-in capital on the Consolidated Statements of Stockholders’ Equity. During the years ended December 31, 2023 and 2022, the Company remeasured the TRA liabilities due to changes in state tax rates, which increased its estimated cash tax savings rate from 25.53% to 26.12% and 25.12% to 25.53%, respectively. The changes were recognized in Other non-operating loss on the Consolidated Statements of Income. Total realized tax savings in 2023 for the year ended December 31, 2022 from each of the tax attributes associated with the TRA were $18.3 million; $15.6 million, exclusive of the related accrued interest, was paid to current and certain former LLC unitholders, representing 85% of the realized tax savings. The remaining 15%, or $2.7 million, of the realized tax savings was retained by the Company.

Members’ Tax Distributions

The Company declared Members’ Tax Distributions of $74.6 million, $28.7 million, and $34.9 million during the years ended December 31, 2023, 2022, and 2021, respectively. Members' Tax Distributions for quarterly estimates are generally paid throughout the year they relate to, and a final payment is made in the first half of the subsequent year.

Other Comprehensive Income (Loss)

The tax effects on the components of Other comprehensive income (loss) were de minimis for the year ended December 31, 2021.