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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 7. Income Taxes The provision for income taxes consists of the following:
| YEARS ENDED DECEMBER 31,
(in thousands) | 2024 |  | 2023 |  | 2022
Current tax expense: |  |  |  |  |
Federal | $ | 14,067 |  |  | $ | 16,530 |  |  | $ | 17,535 |
State | 5,014 |  |  | 5,998 |  |  | 6,400 |
Deferred tax expense | (1,871) |  |  | 1,647 |  |  | 3,076 |
Total Income tax expense | $ | 17,210 |  |  | $ | 24,175 |  |  | $ | 27,011 |
The provision for income taxes shown above varied from the statutory federal income tax rate as follows:
| YEARS ENDED DECEMBER 31,
| 2024 |  | 2023 |  | 2022
Federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of Federal tax effect | 5.6 |  |  | 6.0 |  |  | 5.4 |
Non-deductible compensation and meals and entertainment | 1.8 |  |  | 2.3 |  |  | 2.5 |
Tax credits | (1.5) |  |  | (0.8) |  |  | (1.2) |
Tax benefit from restricted stock vesting | (0.3) |  |  | (0.8) |  |  | (1.0) |
Other | (1.2) |  |  | 0.7 |  |  | (0.3) |
Effective tax rate | 25.4 | % |  | 28.4 | % |  | 26.4 | %
The 2024 effective tax rate was favorably impacted by a reduction in nondeductible executive compensation, non-taxable proceeds from company-owned life insurance, and the recognition of research and development tax credits, as compared to 2023. The 2023 effective rate was unfavorably impacted by a lower Work Opportunity Tax Credit, a lower tax benefit from the vesting of restricted stock and higher non-deductible expenses, as compared to 2022. Deferred tax assets and liabilities are composed of the following:
| DECEMBER 31,
(in thousands) | 2024 |  | 2023
Deferred tax assets: |  |  |
Deferred compensation obligation | $ | 6,549 |  |  | $ | 6,616 |
Operating lease liabilities | 3,923 |  |  | 4,071 |
Research and development | 2,027 |  |  | — |
Stock-based compensation | 1,561 |  |  | 1,475 |
Accrued liabilities | 995 |  |  | 1,345 |
Accounts receivable reserves | 399 |  |  | 382 |
Other | 8 |  |  | 8 |
Deferred tax assets | 15,462 |  |  | 13,897 |
Deferred tax liabilities: |  |  |
Fixed assets | (3,700) |  |  | (4,307) |
ROU assets for operating leases | (3,512) |  |  | (3,684) |
Goodwill | (2,291) |  |  | (2,401) |
Prepaid expenses | (513) |  |  | (367) |
Other | (437) |  |  | — |
Deferred tax liabilities | (10,453) |  |  | (10,759) |
Valuation allowance | — |  |  | — |
Total Deferred tax assets, net | $ | 5,009 |  |  | $ | 3,138 |
In evaluating the realizability of Kforce’s deferred tax assets, management assesses whether it is more likely than not that some portion, or all, of the deferred tax assets will be realized. Management considers, among other things, the ability to generate future taxable income (including reversals of temporary differences and projections of future taxable income) during the periods in which the related temporary differences will become deductible. Kforce is periodically subject to IRS audits, as well as state and other local income tax audits for various tax years. Although Kforce has not experienced any material liabilities in the past due to income tax audits, Kforce can make no assurances concerning any future income tax audits. Kforce and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. With a few exceptions, Kforce is no longer subject to federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2021.

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