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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 11 - INCOME TAXES The domestic and foreign components of income before provision for income taxes are as follows for the years ended December 31:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  | $ | 74,479 |  |  | $ | 69,347 |  |  | $ | 69,159 |
Foreign |  |  | 8,348 |  |  |  | 4,639 |  |  |  | 5,348 |
Income before income taxes |  | $ | 82,827 |  |  | $ | 73,986 |  |  | $ | 74,507 |
Income tax expense consisted of the following for the years ended December 31:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 9,700 |  |  | $ | 12,995 |  |  | $ | 12,979 |
State |  |  | 4,035 |  |  |  | 3,243 |  |  |  | 3,514 |
Foreign |  |  | 2,418 |  |  |  | 1,476 |  |  |  | 1,932 |
Total current |  |  | 16,153 |  |  |  | 17,714 |  |  |  | 18,425 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 4,072 |  |  |  | (9,425 | ) |  |  | 8,872 |
State |  |  | 1,452 |  |  |  | 2,749 |  |  |  | 1,222 |
Foreign |  |  | (250 | ) |  |  | 72 |  |  |  | (596 | )
Total deferred |  |  | 5,274 |  |  |  | (6,604 | ) |  |  | 9,498 |
Income tax expense |  | $ | 21,427 |  |  | $ | 11,110 |  |  | $ | 27,923 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Deferred tax assets (liabilities) consisted of the following at December 31:
|  | 2018 |  |  | 2017 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Allowance for bad debt |  | $ | 1,321 |  |  | $ | 1,003 |
Accrued paid time off |  |  | 1,437 |  |  |  | 1,624 |
Foreign net operating loss (NOL) carry forward |  |  | 1,144 |  |  |  | 1,301 |
State net operating loss (NOL) carry forward |  |  | 507 |  |  |  | 507 |
Stock option compensation |  |  | 2,332 |  |  |  | 2,726 |
Deferred rent |  |  | 3,127 |  |  |  | 3,355 |
Deferred compensation |  |  | 3,348 |  |  |  | 3,238 |
Foreign tax credits |  |  | 3,968 |  |  |  | 505 |
State tax credits |  |  | 2,041 |  |  |  | 1,785 |
Foreign exchange |  |  | 2,430 |  |  |  | 2,051 |
Foreign deferred |  |  | 342 |  |  |  | — |
Accrued liabilities and other |  |  | 4,079 |  |  |  | 3,272 |
|  |  | 26,076 |  |  |  | 21,367 |
Less: Valuation Allowance |  |  | (5,112 | ) |  |  | (1,636 | )
Total Deferred Tax Assets |  |  | 20,964 |  |  |  | 19,731 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Retention |  |  | (1,239 | ) |  |  | (1,375 | )
Prepaid expenses |  |  | (1,301 | ) |  |  | (1,045 | )
Payroll taxes |  |  | (495 | ) |  |  | (489 | )
Unbilled revenue |  |  | (4,135 | ) |  |  | (5,407 | )
Depreciation |  |  | (7,306 | ) |  |  | (4,773 | )
Amortization |  |  | (46,051 | ) |  |  | (39,993 | )
Deferred gain and other |  |  | (602 | ) |  |  | — |
Total Deferred Tax Liabilities |  |  | (61,129 | ) |  |  | (53,082 | )
Total Net Deferred Tax Liability |  | $ | (40,165 | ) |  | $ | (33,351 | )
On December 20, 2017, the U.S. Congress passed the Tax Act, which was signed into law on December 22, 2017 and is generally effective beginning January 1, 2018. The Company was impacted in several ways as a result of the Tax Act, including, but not limited to, provisions which include a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, the revaluation of deferred tax assets and liabilities required as a result of the tax rate change and the application of a mandatory one-time “transition tax” on unremitted earnings of certain foreign subsidiaries that were previously tax deferred. The Company has completed its accounting for the tax effects of enactment of the Tax Act. The Company recorded adjustments to the provisional estimate of the effects on existing deferred tax balances and the one-time transition tax in the period of enactment. The Company recognized these adjustments to the provisional estimate as a decrease in the provision for income taxes. The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is now generally 26.4%. The Company has completed its analysis of the Tax Act and refining its provisional estimates, which affected the measurement of these balances. Pursuant to U.S. Securities and Exchange Commission Staff Accounting Bulletin 118 (“SAB 118”), the provisional amount recorded related to the re-measurement of the deferred tax balances has been adjusted during the measurement period ended December 22, 2018 as an increase in the provision for income taxes, including adjustments to valuation allowances, of approximately $1.0 million. The one-time “transition tax” is based on the Company’s total post-1986 earnings and profits (“E&P”) which the Company has previously deferred from U.S. income taxation. The Company has completed the calculation of the total post-1986 foreign E&P and related foreign tax pools for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount, as well as the related foreign tax credit utilization, changed as the Company finalized its calculation of post-1986 foreign E&P and related foreign tax pools that were previously deferred from U.S. federal taxation and the amounts held in cash or other specified assets. Similarly, the cumulative foreign tax credit carry forward balance as of December 31, 2017 increased by approximately $2.2 million and the valuation allowance required increased by approximately $2.2 million. No additional income taxes have been provided for on any remaining undistributed foreign earnings not subject to the transition tax. No additional deferred income taxes have been provided for the $8.2 million of additional favorable outside basis differences inherent in these foreign entities because these amounts continue to be permanently reinvested in foreign operations. Pursuant to SAB 118, the provisional amount recorded related to the transition tax has been adjusted during the measurement period ended December 22, 2018. The Company recognized this adjustment to the provisional estimate as a decrease in the provision for income taxes of approximately $1.1 million during the third quarter of 2018. At both December 31, 2018 and 2017, the Company had net operating loss (“NOL”) carry-forwards for foreign income taxes of approximately $3.5 million and $4.1 million, respectively, all of which may be carried forward indefinitely. At December 31, 2018, the Company had NOL carry-forwards for state income tax purposes of approximately $8.9 million, which expire in 2034. The Company acquired these NOLs as a result of its purchase of Olson in November 2014. Internal Revenue Code Section 382 imposes an annual limitation on the use of a corporation’s NOLs, tax credits and other carryovers after an “ownership change” occurs. Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change NOLs and credits. In general, the annual limitation is determined by multiplying the value of the corporation’s stock immediately before the ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Any unused portion of the annual limitation is available for use in future years until such NOLs are scheduled to expire (in general, NOLs may be carried forward 20 years). The Company presently estimates that it will be able to fully utilize the remaining acquired NOLs prior to their expiration. At December 31, 2018, the Company had gross state income tax credit carry-forwards of approximately $2.6 million, which expire between 2021 and 2027. A deferred tax asset of approximately $2.0 million (net of federal benefit) has been established related to these state income tax credit carry-forwards as of December 31, 2018. The need to establish valuation allowances for deferred assets is based on a more-likely-than-not threshold that the benefit of such assets will be realized in future periods. Appropriate consideration has been given to all available evidence, including historical operating results, projections of taxable income, and tax planning alternatives. The Company concluded that a valuation allowance of approximately $1.1 million and $1.1 million was required for tax attributes related to specified foreign jurisdictions as of December 31, 2018 and 2017, respectively, and an additional $3.5 million valuation allowance was recorded against our US foreign tax credit carry forwards as a result of enactment of the Tax Act as of December 31, 2017. The total amount of unrecognized tax benefits as of December 31, 2018 and 2017, was $0.2 million and $0.8 million, respectively. Included in the balance as of December 31, 2018 and 2017, were $0.2 million and $0.7 million, respectively, of tax positions that, if recognized, would impact the effective tax rate. The unrecognized tax benefit reconciliation, excluding penalty and interest, is as follows:
Unrecognized tax benefits at January 1, 2016 |  | $ | 400 |
Increase attributable to tax positions taken during a prior period |  |  | 925 |
Decrease attributable to lapse of statute of limitations |  |  | (140 | )
Unrecognized tax benefits at December 31, 2016 |  |  | 1,185 |
Decrease attributable to lapse of statute of limitations |  |  | (365 | )
Unrecognized tax benefits at December 31, 2017 |  |  | 820 |
Increase attributable to tax positions taken during the current period |  |  | 216 |
Decrease attributable to settlements with taxing authorities |  |  | (37 | )
Decrease attributable to lapse of statute of limitations |  |  | (783 | )
Unrecognized tax benefits at December 31, 2018 |  | $ | 216 |
The Company’s policy is not to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. The Company had approximately zero and $0.2 million of accrued penalty and interest at December 31, 2018 and 2017, respectively. The Company’s 2014 to 2017 tax years remain subject to examination by the Internal Revenue Service for federal tax purposes. Certain significant state and foreign tax jurisdictions are also either currently under examination or remain open under the statutes of limitation and subject to examination for the tax years from 2014 to 2017. Although the Company believes it has adequately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater than the Company’s accrued position. Accordingly, additional provisions on federal, state and foreign income tax related matters could be recorded in the future as revised estimates are made or the underlying matters are effectively settled or otherwise resolved. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued. The Company believes it is reasonably possible that, during the next 12 months, the Company’s liability for uncertain tax positions may not change. The Company’s provision for income taxes differs from the federal statutory rate. The differences between the statutory rate and the Company’s provision are as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Taxes at statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal benefit |  |  | 5.2 | % |  |  | 4.4 | % |  |  | 3.9 | %
Foreign tax rate differential |  |  | 0.5 | % |  |  | (0.3 | )% |  |  | (0.1 | )%
Tax legislation |  |  | — |  |  |  | (22.6 | )% |  |  | — |
Other permanent differences |  |  | 1.8 | % |  |  | 0.7 | % |  |  | 0.8 | %
Prior year tax adjustments |  |  | 0.2 | % |  |  | (0.3 | )% |  |  | (1.0 | )%
Unrecognized tax benefits |  |  | (0.6 | )% |  |  | 0.1 | % |  |  | 1.0 | %
Valuation allowance |  |  | 1.3 | % |  |  | 0.7 | % |  |  | (0.3 | )%
Equity-based compensation |  |  | (3.0 | )% |  |  | (2.1 | )% |  |  | (1.0 | )%
Tax credits |  |  | (0.5 | )% |  |  | (0.6 | )% |  |  | (0.8 | )%
Taxes at effective rate |  |  | 25.9 | % |  |  | 15.0 | % |  |  | 37.5 | %

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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