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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
INCOME TAXES |
INCOME TAXES | NOTE 14—INCOME TAXES The components of income before income taxes for the years ended December 31, 2019 and 2018 consists of the following:
|  | Years Ended December 31, |
|  | 2019 |  | 2018 |
Domestic |  | $ | 1,206 |  | $ | (6,998) |
Foreign |  |  | 5,933 |  |  | 13,110 |
Total income before income taxes |  | $ | 7,139 |  | $ | 6,112 |
The components of the 2019 and 2018 income tax provision are as follows:
|  | Years Ended December 31, |
|  | 2019 |  | 2018 |
Current: |  |  |  |  |  |  |
Federal |  | $ | (327) |  | $ | (3,378) |
State |  |  | 603 |  |  | 575 |
Foreign |  |  | 2,431 |  |  | 3,681 |
Total current provision |  |  | 2,707 |  |  | 878 |
Deferred: |  |  |  |  |  |  |
Federal |  |  | (123) |  |  | (268) |
State |  |  | (140) |  |  | (237) |
Foreign |  |  | 1,354 |  |  | 62 |
Total deferred benefit |  |  | 1,091 |  |  | (443) |
Total |  | $ | 3,798 |  | $ | 435 |
The differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 21% for both years ended December 31, 2019 and 2018 were as follows:
|  | Years Ended December 31,
|  | 2019 |  | 2018 |
Tax provision computed at 21% |  | $ | 1,499 |  | $ | 1,284 |
Nondeductible expenses |  |  | 521 |  |  | 372 |
State income taxes, net of federal benefit |  |  | 327 |  |  | 239 |
Tax impact of foreign operations |  |  | 1,347 |  |  | 1,941 |
Valuation allowances increase (release) |  |  | (141) |  |  | (2,238) |
Net increase (decrease) of uncertain tax positions (1) |  |  | (34) |  |  | (2,818) |
Tax law change impact on transition tax |  |  | — |  |  | 1,642 |
Other |  |  | 279 |  |  | 13 |
Income tax provision |  | $ | 3,798 |  | $ | 435 |
Effective income tax rates |  |  | 53.2 | % |  | 7.1 | %
________________________________________
| (1) |  | During the years ended December 31, 2018, the Company reversed an unrealized tax liability of $0.9 million established at the time of the acquisition of Alsbridge. An associated tax indemnity receivable was also reversed and recorded in selling, general and administrative expense.
On December 22, 2017, the Tax Cuts and Jobs Act was enacted. The company completed its evaluation of the impact of the new law in the fourth quarter of 2018 and recognized an additional deferred tax liability and tax expense of $1.6 million associated with repatriation of unremitted foreign earnings as required under the new tax law (“transition tax”). The company recorded this amount consistent with its indefinite reinvestment assertion. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:
|  | December 31, |
|  | 2019 |  | 2018 |
Noncurrent deferred tax asset |  |  |  |  |  |  |
Compensation related expenses |  | $ | 2,279 |  | $ | 2,441 |
Foreign currency translation |  |  | 2,458 |  |  | 2,491 |
U.S. foreign tax credit carryovers |  |  | 879 |  |  | 811 |
Foreign net operating loss carryovers |  |  | 5,563 |  |  | 5,482 |
Accruals and reserves |  |  | 1,404 |  |  | 814 |
Operating lease right-of-use assets |  |  | 2,034 |  |  | — |
Other |  |  | 224 |  |  | 442 |
Valuation allowance for deferred tax assets |  |  | (3,989) |  |  | (4,209) |
Total noncurrent deferred tax asset |  |  | 10,852 |  |  | 8,272 |
Noncurrent deferred tax liability |  |  |  |  |  |  |
Depreciable assets |  |  | (510) |  |  | (486) |
Prepaids |  |  | (514) |  |  | (426) |
Intangible assets |  |  | (1,177) |  |  | (1,436) |
Investment in foreign subsidiaries |  |  | (3,323) |  |  | (2,975) |
Foreign earnings distribution taxes |  |  | (1,741) |  |  | (1,439) |
Foreign intangibles and reserves |  |  | (1,754) |  |  | (356) |
Operating lease liabilities |  |  | (1,716) |  |  | — |
Total noncurrent deferred tax liability |  |  | (10,735) |  |  | (7,118) |
Net noncurrent deferred tax asset |  |  | 117 |  |  | 1,154 |
Net deferred tax asset |  | $ | 117 |  | $ | 1,154 |
A valuation allowance was established at December 31, 2019 and 2018 due to estimates of future utilization of net operating loss carryovers in the U.S. and certain foreign jurisdictions, derived primarily from acquisitions and recorded through purchase accounting. The valuation allowance at December 31, 2019 and 2018 also includes a full valuation for the Company’s foreign tax credit carryovers and foreign taxes on its controlled foreign corporation. Uncertain tax positions Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. It is the Company’s policy to accrue for interest and penalties related to its uncertain tax positions within income tax expense. A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows:
|  | December 31, |
|  | 2019 |  | 2018 |
Balance, beginning of year |  | $ | 1,475 |  | $ | 4,050 |
Additions as a result of tax positions taken during the current period |  |  | 90 |  |  | 145 |
Reductions as a result of tax positions taken during the current period |  |  | — |  |  | (1,295) |
Additions as a result of tax positions taken during a prior period |  |  | — |  |  | — |
Reductions as a result of lapse of statute |  |  | (31) |  |  | (1,425) |
Balance, end of year |  | $ | 1,534 |  | $ | 1,475 |
We do not expect our unrecognized tax benefits to significantly change in the next twelve months. The Company has recognized through income tax expense approximately $0.8 million of interest and penalties related to uncertain tax positions. The amount of unrecognized tax benefit, if recognized, that would impact the effective tax rate is $1.5 million. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non U.S. income tax examinations by tax authorities for years before 2012.

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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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