XML 33 R16.htm IDEA: XBRL DOCUMENT
v3.22.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes Income Tax Provision. The components of net income before income taxes are as follows (in thousands):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Domestic |  | $ | 53,251 |  |  | $ | 98,261 |  |  | $ | 77,721 |
Australia |  |  | (5,851 | ) |  |  | (3,429 | ) |  |  | (2,085 | )
India |  |  | 9,517 |  |  |  | 5,873 |  |  |  | 6,245 |
Ireland |  |  | (3,391 | ) |  |  | 1,627 |  |  |  | 874 |
United Kingdom |  |  | 2,533 |  |  |  | (5,734 | ) |  |  | (4,281 | )
Foreign other |  |  | 4,722 |  |  |  | 4,348 |  |  |  | 6,882 |
Total |  | $ | 60,781 |  |  | $ | 100,946 |  |  | $ | 85,356 |
The income tax provision consists of the following (in thousands):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 30,012 |  |  | $ | 17,012 |  |  | $ | 17,760 |
State |  |  | 6,517 |  |  |  | 5,835 |  |  |  | 5,373 |
Australia |  |  | 55 |  |  |  | 118 |  |  |  | 40 |
India |  |  | 4,370 |  |  |  | 959 |  |  |  | 1,788 |
Ireland |  |  | 273 |  |  |  | 561 |  |  |  | 567 |
United Kingdom |  |  | 349 |  |  |  | 426 |  |  |  | 357 |
Foreign other |  |  | 2,772 |  |  |  | 1,338 |  |  |  | 2,026 |
|  |  | 44,348 |  |  |  | 26,249 |  |  |  | 27,911 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (21,962 | ) |  |  | 2,294 |  |  |  | (497 | )
State |  |  | (3,073 | ) |  |  | 344 |  |  |  | (1,031 | )
Australia |  |  | (890 | ) |  |  | (180 | ) |  |  | (424 | )
India |  |  | (1,388 | ) |  |  | 368 |  |  |  | (387 | )
Ireland |  |  | (341 | ) |  |  | (150 | ) |  |  | 331 |
United Kingdom |  |  | 469 |  |  |  | (558 | ) |  |  | 304 |
Foreign other |  |  | (442 | ) |  |  | 248 |  |  |  | 438 |
|  |  | (27,627 | ) |  |  | 2,366 |  |  |  | (1,266 | )
Total income tax provision |  | $ | 16,721 |  |  | $ | 28,615 |  |  | $ | 26,645 |
The effective tax rate in India of 31.3%, 22.6% and 22.4% in 2022, 2021 and 2020 respectively, differs from the statutory rate of approximately 29% due primarily to certain operations occurring within a Special Economic Zone (“SEZ”). Under the terms of SEZ, CSG qualifies for a reduced income tax rate on operations within the SEZ for a period of up to 10 years, beginning in 2018. In 2022, the rate increased due to reduced operations within the SEZ. The effective tax rates in Australia, Ireland and the United Kingdom differ from the statutory rates of 30%, 12.5%, and 19% respectively, due to changes in valuation allowances on deferred tax assets, withholding taxes incurred, and the impact of foreign exchange recognition on certain intercompany loans. The difference between our income tax provision computed at the statutory Federal income tax rate and our financial statement income tax is summarized as follows (in thousands):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Provision at Federal rate of 21% |  | $ | 12,764 |  |  | $ | 21,199 |  |  | $ | 17,925 |
State income taxes, net of Federal impact |  |  | 2,079 |  |  |  | 4,882 |  |  |  | 3,430 |
Research and experimentation credits |  |  | (1,560 | ) |  |  | (2,062 | ) |  |  | (2,705 | )
Stock award vesting |  |  | (1,355 | ) |  |  | (538 | ) |  |  | (540 | )
Tax uncertainties |  |  | (227 | ) |  |  | 69 |  |  |  | (403 | )
Section 162(m) compensation limitation |  |  | 2,326 |  |  |  | 1,610 |  |  |  | 4,494 |
Foreign rate differential |  |  | 571 |  |  |  | 592 |  |  |  | 462 |
Valuation allowance for deferred tax assets |  |  | 638 |  |  |  | 1,427 |  |  |  | 1,002 |
Withholding tax |  |  | 1,948 |  |  |  | 2,305 |  |  |  | 2,572 |
Other impact of foreign operations |  |  | 422 |  |  |  | (468 | ) |  |  | 621 |
Statutory rate change |  |  | 303 |  |  |  | (299 | ) |  |  | 71 |
Convertible debt premium |  |  | (1,017 | ) |  |  | — |  |  |  | — |
Other |  |  | (171 | ) |  |  | (102 | ) |  |  | (284 | )
Total income tax provision |  | $ | 16,721 |  |  | $ | 28,615 |  |  | $ | 26,645 |
We have undistributed earnings of approximately $70 million from certain foreign subsidiaries. We intend to indefinitely reinvest these foreign earnings; therefore, a provision has not been made for foreign withholding taxes that might be payable upon remittance of such earnings. Determination of the amount of unrecognized deferred tax liability on unremitted foreign earnings is not practicable because of the complexities of the hypothetical calculation. Deferred Income Taxes. Net deferred income tax assets as of December 31, 2022 and 2021 are as follows (in thousands):
|  | 2022 |  |  | 2021 |
Deferred income tax assets |  | $ | 81,747 |  |  | $ | 56,065 |
Deferred income tax liabilities |  |  | (27,733 | ) |  |  | (25,250 | )
Valuation allowance |  |  | (27,925 | ) |  |  | (29,983 | )
Net deferred income tax assets |  | $ | 26,089 |  |  | $ | 832 |
The components of our net deferred income tax assets (liabilities) as of December 31, 2022 and 2021 are as follows (in thousands):
|  | 2022 |  |  | 2021 |
Net deferred income tax assets: |  |  |  |  |  |
Accrued expenses and reserves |  | $ | 6,206 |  |  | $ | 9,470 |
Stock-based compensation |  |  | 5,321 |  |  |  | 3,807 |
Software |  |  | (855 | ) |  |  | (1,435 | )
Client contracts and related intangibles |  |  | (9,577 | ) |  |  | (5,993 | )
Goodwill |  |  | (13,424 | ) |  |  | (11,563 | )
Net operating loss carryforwards |  |  | 27,820 |  |  |  | 31,548 |
Property and equipment |  |  | (3,789 | ) |  |  | (4,311 | )
Deferred revenue |  |  | 4,882 |  |  |  | 3,578 |
State taxes |  |  | - |  |  |  | 195 |
Contingent payments |  |  | (88 | ) |  |  | (123 | )
Foreign exchange gain/loss |  |  | 1,791 |  |  |  | 1,064 |
Operating lease right-of-use assets and lease liabilities |  |  | 5,872 |  |  |  | 1,768 |
Unrecognized tax benefit |  |  | 408 |  |  |  | 522 |
Credits and incentives |  |  | 374 |  |  |  | 397 |
R&D |  |  | 28,733 |  |  |  | 554 |
Other |  |  | 340 |  |  |  | 1,337 |
Total net deferred income tax assets |  |  | 54,014 |  |  |  | 30,815 |
Less: valuation allowance |  |  | (27,925 | ) |  |  | (29,983 | )
Net deferred income tax assets |  | $ | 26,089 |  |  | $ | 832 |
Beginning January 1, 2022, we are required to capitalize certain research and development expenditures in accordance with section 174 of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, instead of previously being allowed to expense. Amortization of such capitalized expenditures are allowed over a 5-year period if incurred domestically or a 15-year period if incurred outside the United States. Of the total R&D related deferred income tax assets (net of applicable amortization) as of December 31, 2022, in the table above, Federal and state was $28.2 million with the remaining amount attributable to foreign R&D credits. We regularly assess the likelihood of the future realization of our deferred income tax assets. To the extent we believe that it is more likely than not that a deferred income tax asset will not be realized, a valuation allowance is established. As of December 31, 2022, we believe we will generate sufficient taxable income in the future such that we will realize 100% of the benefit of our U.S. Federal deferred income tax assets, thus no valuation allowance has been established. As of December 31, 2022, we have state and foreign deferred income tax assets (net of federal benefit related to state and foreign income tax jurisdictions) of $3.2 million and $34.7 million, respectively, and have established valuation allowances against those state and foreign income tax deferred income tax assets of $2.0 million and $26.0 million, respectively. As of December 31, 2022 and 2021, we have an acquired U.S. Federal net operating loss (“NOL”) carryforward of approximately $13 million and $18 million, respectively, which will begin to expire in 2029 and can be utilized through 2033. The acquired U.S. Federal NOL carryforward is attributable to the pre-acquisition periods of acquired businesses. The annual utilization of this U.S. Federal NOL carryforward is limited pursuant to Section 382 of the Internal Revenue Code of 1986, as amended. In addition, as of December 31, 2022 and 2021, we have: (i) state NOL carryforwards of approximately $42 million and $41 million, respectively, which will expire beginning in 2023 with a portion of the losses available over an indefinite period of time; and (ii) foreign subsidiary NOL carryforwards of approximately $104 million and $116 million, respectively, which will expire beginning in 2031, with a portion of the losses available over an indefinite period of time. Accounting for Uncertainty in Income Taxes. We are required to estimate our income tax liability in each jurisdiction in which we operate, including U.S. Federal, state, and foreign income tax jurisdictions. Various judgments and estimates are required in evaluating our tax positions and determining our provisions for income taxes. There are certain transactions and calculations for which the ultimate income tax determination may be uncertain. In addition, we may be subject to examination of our income tax returns by various foreign, federal, state, or local tax authorities, which could result in adverse outcomes. For these reasons, we establish a liability associated with unrecognized tax benefits based on estimates of whether additional taxes and interest may be due. This liability is adjusted based upon changing facts and circumstances, such as the closing of a tax audit, the expiration of a statute of limitations or the refinement of an estimate. A reconciliation of the beginning and ending balances of our liability for unrecognized tax benefits is as follows (in thousands):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Balance, beginning of year |  | $ | 2,929 |  |  | $ | 1,393 |  |  | $ | 1,540 |
Additions related to prior acquisitions |  |  | 2 |  |  |  | 1,508 |  |  |  | 160 |
Lapse of statute of limitations |  |  | 5 |  |  |  | (151 | ) |  |  | (313 | )
Additions for tax positions of prior years |  |  | 8 |  |  |  | 36 |  |  |  | 111 |
Reductions for tax positions of prior years |  |  | (382 | ) |  |  | (62 | ) |  |  | (105 | )
Additions for tax positions of current year |  |  | — |  |  |  | 205 |  |  |  | — |
Balance, end of year |  | $ | 2,562 |  |  | $ | 2,929 |  |  | $ | 1,393 |
We recognize interest and penalties associated with our liability for unrecognized tax benefits as a component of income tax expense in our Income Statements. In addition to the $2.6 million, $2.9 million, and $1.4 million of liability for unrecognized tax benefits as of December 31, 2022, 2021, and 2020, we had $0.6 million, $0.7 million, and $0.6 million, respectively of income tax-related accrued interest, net of any federal benefit of deduction. If recognized, the $2.6 million of unrecognized tax benefits as of December 31, 2022, would favorably impact our effective tax rate in future periods. We file income tax returns in the U.S. Federal jurisdiction, various U.S. state and local jurisdictions, and many foreign jurisdictions. The U.S., U.K., India, and Australia are the primary taxing jurisdictions in which we operate. The years open for audit vary depending on the taxing jurisdiction. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $0.6 million over the next twelve months due to completion of tax audits and the expiration of statute of limitations.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration