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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

Income before income taxes consisted of the following:

 

Year Ended December 31,

 

2021

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

U.S.

 

$

39,569

 

 

$

(1,029

)

 

$

(1,472

)

Foreign

 

 

4,295

 

 

 

40,117

 

 

 

25,109

 

Income before income taxes

 

$

43,864

 

 

$

39,088

 

 

$

23,637

 

The provision for income taxes consisted of the following:

 

Year Ended December 31,

 

2021

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Current:

 

 

 

 

 

 

 

 

 

U.S. federal and state

 

$

11,070

 

 

$

12,561

 

 

$

1,546

 

Foreign

 

 

5,238

 

 

 

8,457

 

 

 

9,525

 

Deferred:

 

 

 

 

 

 

 

 

 

U.S. federal and state

 

 

(126

)

 

 

(8,870

)

 

 

1,643

 

Foreign

 

 

(2,866

)

 

 

(135

)

 

 

1,397

 

Provision for income taxes

 

$

13,316

 

 

$

12,013

 

 

$

14,111

 

Net cash payments for income taxes were $24,936,000, $12,216,000, and $16,996,000 in 2021, 2020, and 2019, respectively.

The provision for income taxes is reconciled to the federal statutory income tax rate of 21% in 2021, 2020, and 2019, as follows:

 

Year Ended December 31,

 

2021

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Federal income taxes at statutory rate

 

$

9,211

 

 

$

8,208

 

 

$

4,964

 

State income taxes, net of federal benefit

 

 

2,310

 

 

 

325

 

 

 

505

 

Goodwill impairment

 

 

—

 

 

 

2,322

 

 

 

1,883

 

Foreign taxes

 

 

2,896

 

 

 

3,328

 

 

 

2,276

 

Change in valuation allowance

 

 

(1,185

)

 

 

(374

)

 

 

3,919

 

Research and development credits

 

 

(436

)

 

 

(1,001

)

 

 

(626

)

Foreign tax credits

 

 

(1,083

)

 

 

(1,150

)

 

 

(283

)

Nondeductible meals and entertainment

 

 

254

 

 

 

377

 

 

 

724

 

Change in permanent reinvestment assertion

 

 

627

 

 

 

776

 

 

 

—

 

Disposals and liquidations of businesses

 

 

—

 

 

 

(935

)

 

 

—

 

Global intangible low-tax income, net of credits

 

 

531

 

 

 

(54

)

 

 

892

 

Foreign-derived intangible income deduction

 

 

(94

)

 

 

(115

)

 

 

(315

)

Tax rate changes

 

 

(431

)

 

 

(359

)

 

 

486

 

Other

 

 

716

 

 

 

665

 

 

 

(314

)

Provision for income taxes

 

$

13,316

 

 

$

12,013

 

 

$

14,111

 

The Company's consolidated effective income tax rate may change periodically due to changes in enacted statutory tax rates, changes in tax law or policy, changes in the composition of taxable income from the countries in which it operates, the Company's ability to utilize net operating loss and tax credit carryforwards, and changes in unrecognized tax benefits.

The Company’s effective income tax rate in 2021 was impacted by enacted foreign tax rate changes, change in valuation allowances for certain jurisdictions, and deferred taxes attributable to certain undistributed foreign earnings that are no longer permanently reinvested. The Company's effective income tax rate in 2020 was impacted by goodwill impairment charges, disposals and liquidations of businesses, and deferred taxes attributable to undistributed foreign earnings that are no longer permanently reinvested. The Company's effective income tax rate in 2019 was impacted by goodwill impairment charges, arbitration and claim settlements, and valuation allowance establishment on certain state net operating losses.

During 2021 and 2020, the Company released its permanent reinvestment position on a portion of prior year undistributed earnings for certain foreign operations and accrued deferred taxes attributable to these earnings. Beyond these earnings we have not changed the reinvestment assertion on our undistributed earnings or other outside basis differences of our remaining foreign subsidiaries. Excluding the change in position for certain foreign operations, no additional income or withholding taxes have been provided for indefinitely reinvested undistributed foreign earnings, other than those previously taxed nor have any taxes been provided for outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. We have estimated that we have book over tax basis differences of approximately $90,269,000. Due to withholding tax, basis computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time.

Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.

Deferred income taxes consisted of the following at December 31, 2021 and 2020:

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Accounts receivable allowance

 

$

1,386

 

 

$

1,019

 

Accrued compensation

 

 

16,182

 

 

 

14,655

 

Accrued pension liabilities

 

 

—

 

 

 

4,950

 

Self-insured risks

 

 

5,280

 

 

 

5,746

 

Deferred revenues

 

 

5,045

 

 

 

5,376

 

Interest

 

 

2,907

 

 

 

2,419

 

Tax credit carryforwards

 

 

3,326

 

 

 

7,090

 

Loss carryforwards

 

 

28,122

 

 

 

22,805

 

Lease liability

 

 

28,547

 

 

 

31,435

 

Other

 

 

2,218

 

 

 

2,158

 

Gross deferred income tax assets

 

 

93,013

 

 

 

97,653

 

Unbilled revenues

 

 

6,290

 

 

 

5,311

 

Accrued pension liabilities

 

 

2,491

 

 

 

—

 

Repatriated earnings

 

 

937

 

 

 

776

 

Depreciation and amortization

 

 

27,593

 

 

 

23,474

 

Lease right-of-use asset

 

 

24,958

 

 

 

27,513

 

Gross deferred income tax liabilities

 

 

62,269

 

 

 

57,074

 

Net deferred income tax assets before valuation allowances

 

 

30,744

 

 

 

40,579

 

Valuation allowance

 

 

(14,114

)

 

 

(16,579

)

Net deferred income tax assets

 

$

16,630

 

 

$

24,000

 

Amounts recognized in the Consolidated Balance Sheets consist of:

 

 

 

 

 

 

Long-term deferred income tax assets included in "Deferred income tax assets"

 

 

21,266

 

 

 

25,595

 

Long-term deferred income tax liabilities included in "Other noncurrent liabilities"

 

 

(4,636

)

 

 

(1,595

)

Net deferred income tax assets

 

$

16,630

 

 

$

24,000

 

At December 31, 2021, the Company had deferred tax assets related to loss carryforwards of $28,352,000, before netting of unrecognized tax benefits of $244,000. An estimated $22,288,000 of the deferred tax assets will not expire, and $6,064,000 will expire over the next 20 years if not utilized by the Company.

Changes in the Company's deferred tax valuation allowance are recorded as adjustments to the provision for income taxes. An analysis of the Company's deferred tax asset valuation allowances is as follows for the years ended December 31, 2021, 2020, and 2019.

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Balance, beginning of year

 

$

16,579

 

 

$

28,128

 

 

$

25,654

 

Other changes

 

 

(2,465

)

 

 

(11,549

)

 

 

2,264

 

Balance, end of year

 

$

14,114

 

 

$

16,579

 

 

$

28,128

 

 

Changes to the valuation allowance for the year ended December 31, 2021 were primarily due to anticipated expiration of certain foreign tax credits after consideration of the four sources of taxable income and losses in certain of the Company's international operations, net of releases for certain state NOLs. Changes to the valuation allowance for the year ended December 31, 2020 were primarily due to anticipated expiration of certain foreign tax credits after consideration of the four sources of taxable income and disposals and liquidations of businesses, net of losses in certain of the Company’s international operations. Changes to the valuation allowance for the year ended December 31, 2019 were primarily due to anticipated expiration of certain state NOLs after consideration of the four sources of taxable income and losses in certain of the Company’s international operations.

A reconciliation of the beginning and ending balance of unrecognized income tax benefits follows:

 

 

 

(In thousands)

 

Balance at December 31, 2018

 

$

7,401

 

Additions for tax provisions related to the current year

 

 

515

 

Additions for tax positions related to prior years

 

 

646

 

Reductions for tax positions related to the prior year

 

 

(113

)

Reductions for settlements

 

 

(2,642

)

Lapses of applicable statutes of limitation

 

 

(520

)

Balance at December 31, 2019

 

$

5,287

 

Additions for tax provisions related to the current year

 

 

92

 

Additions for tax positions related to prior years

 

 

2

 

Reductions for tax positions related to prior years

 

 

(505

)

Reductions for settlements

 

 

(516

)

Lapses of applicable statutes of limitation

 

 

(582

)

Balance at December 31, 2020

 

$

3,778

 

Reductions for tax positions related to prior years

 

 

(11

)

Reductions for settlements

 

 

(21

)

Currency translation adjustment

 

 

4

 

Balance at December 31, 2021

 

$

3,750

 

The Company accrues interest and, if applicable, penalties related to unrecognized tax benefits in income taxes. Total accrued interest expense at December 31, 2021, 2020, and 2019, was $119,000, $107,000, and $256,000, respectively.

Included in the total unrecognized tax benefits at December 31, 2021, 2020, and 2019 were $669,000, $713,000, and $1,940,000, respectively, of tax benefits that, if recognized, would affect the effective income tax rate.

The Company conducts business in a number of countries and, as a result, files U.S. federal and various state and foreign jurisdiction income tax returns. In the normal course of business, the Company is subject to examination by various taxing jurisdictions throughout the world, including Canada, the U.K., and the U.S. With few exceptions, the Company is no longer subject to income tax examinations for years before 2011.

Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, including interest and penalties, have been provided for any adjustments that are expected to result from those years.

The Company does not expect any material reductions to unrecognized income tax benefits within the next 12 months as a result of projected resolutions of income tax uncertainties.