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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | (5) Income Taxes Income before income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic |  | $ | 20,061 |  |  | $ | 22,303 |  |  | $ | 11,347 |
Foreign |  |  | 7,310 |  |  |  | 8,406 |  |  |  | 7,973 |
Total |  | $ | 27,371 |  |  | $ | 30,709 |  |  | $ | 19,320 |
The components of the income tax provision (benefit) are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,587 |  |  | $ | 6,094 |  |  | $ | 5,103 |
State |  |  | 1,060 |  |  |  | 2,330 |  |  |  | 1,252 |
Foreign |  |  | 2,159 |  |  |  | 2,032 |  |  |  | 1,954 |
Total current |  |  | 5,806 |  |  |  | 10,456 |  |  |  | 8,309 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 5,550 |  |  |  | 2,719 |  |  |  | (723 | )
State |  |  | 700 |  |  |  | 59 |  |  |  | (232 | )
Foreign |  |  | 175 |  |  |  | (176 | ) |  |  | (30 | )
Total deferred |  |  | 6,425 |  |  |  | 2,602 |  |  |  | (985 | )
Income tax provision |  | $ | 12,231 |  |  | $ | 13,058 |  |  | $ | 7,324 |
A reconciliation of the federal statutory rate to Forrester’s effective tax rate is as follows:
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Income tax provision at federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State tax provision, net of federal benefit |  |  | 4.0 |  |  |  | 5.0 |  |  |  | 4.0 |
Foreign tax rate differential |  |  | (3.4 | ) |  |  | (4.4 | ) |  |  | (3.0 | )
Stock option compensation deduction |  |  | 0.1 |  |  |  | 0.6 |  |  |  | 2.5 |
Withholding taxes |  |  | 1.7 |  |  |  | 0.5 |  |  |  | 0.3 |
Non-deductible expenses |  |  | 1.8 |  |  |  | 1.5 |  |  |  | 1.7 |
Change in valuation allowance |  |  | 3.9 |  |  |  | 3.2 |  |  |  | (0.7 | )
Change in tax legislation |  |  | 5.8 |  |  |  | — |  |  |  | (3.1 | )
Audit settlements |  |  | (4.0 | ) |  |  | — |  |  |  | — |
Other, net |  |  | (0.2 | ) |  |  | 1.1 |  |  |  | 1.2 |
Effective tax rate |  |  | 44.7 | % |  |  | 42.5 | % |  |  | 37.9 | %
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a decrease in the corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the Act in its 2017 income tax provision in accordance with the Company’s understanding of the Act and guidance available as of the date of this filing and as a result have recorded $1.6 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount related to the remeasurement of federal deferred tax assets and liabilities was $1.2 million. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was $0.4 million based on cumulative foreign earnings of $22.6 million. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. S AB 118 p r ov i d es a measu r eme nt p e r i od t h at shou ld not e x t e nd b e yond one y ear fr om t he e n ac tme nt d a te of the Act f or c omp a n i es to c omp l e te t he acc oun ti ng for the income tax effects of the Act. In acc o r d a n ce w ith S AB 118, a c omp a ny must r e f l ect t he i n c ome t ax e ff ec ts of t hose asp ec ts of t he A ct f or w h i ch t he acc oun ti ng und er is c omp l e t e. To t he e x t e nt t h at a c omp a ny’s acc oun ti ng f or ce r t a in i n c ome t ax e ff ec ts of t he A ct is i n c omp l e te, but it is a b le to d e t e rmi ne a r eason a b le estima t e, it must r ec o rd a p r ov isi on al estima te in t he f i n a n c i al st a t eme n ts. Any subsequent adjustment to these provisional amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. As the Company c omp l etes its a n a l ysis of t he A c t, and c o ll ects a nd p r e p a res n ecessa ry d a t a, a nd i n t e r p r ets a ny a dd iti on al gu i d a n ce issu ed by t he U.S. T r easu ry D e p a r tme n t, t he I R S, a nd o t h er st a nd a r d-se tti ng bod i es, the Company may ma ke a d j ustme n ts to t he p r ov isi on al amoun ts. In July 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. The opinion invalidates part of a treasury regulation requiring stock-based compensation to be included in any qualified intercompany cost-sharing arrangement. The Company has reviewed this case and concluded that recording a tax benefit of $0.6 million during 2015, representing the benefit of adjusting its cost-sharing agreement for the years of 2012 through 2014, was appropriate based on the opinion in the case. This benefit is included in the change in tax legislation line in the table above. There were no significant developments in this case during 2017 and the Company will continue to monitor ongoing developments and potential impacts to its consolidated financial statements. The components of deferred income taxes are as follows (in thousands):
|  | As of December 31, |
|  | 2017 |  |  | 2016 |
Non-deductible reserves and accruals |  | $ | 4,936 |  |  | $ | 8,189 |
Net operating loss and other carryforwards |  |  | 8,528 |  |  |  | 7,560 |
Stock compensation |  |  | 2,644 |  |  |  | 5,327 |
Depreciation and amortization |  |  | 402 |  |  |  | 1,196 |
Other assets |  |  | 46 |  |  |  | 50 |
Gross deferred tax asset |  |  | 16,556 |  |  |  | 22,322 |
Less - valuation allowance |  |  | (2,686 | ) |  |  | (2,193 | )
Sub-total |  |  | 13,870 |  |  |  | 20,129 |
Other liabilities |  |  | (911 | ) |  |  | (453 | )
Goodwill amortization |  |  | (5,677 | ) |  |  | (5,013 | )
Deferred commissions |  |  | (3,873 | ) |  |  | (4,928 | )
Net deferred tax asset |  | $ | 3,409 |  |  | $ | 9,735 |
As of December 31, 2017 and 2016, long-term net deferred tax assets were $3.5 million and $9.8 million, respectively, and are included in other assets in the Consolidated Balance Sheets. Long-term net deferred tax liabilities were $0.1 million at December 31, 2017 and 2016, and are included in non-current liabilities in the Consolidated Balance Sheets. The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a net deferred income tax asset. Judgment is required in considering the relative impact of negative and positive evidence. In arriving at these judgments, the weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. Although realization is not assured, based upon the Company’s historical taxable income and projections of the Company’s future taxable income over the periods during which the deferred tax assets are deductible and the carryforwards expire, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances, as discussed below. As of December 31, 2017 and 2016, the Company maintained a valuation allowance of approximately $2.7 million and $2.2 million, respectively, primarily relating to U.S. capital losses from the Company’s investment in technology-related private equity funds, and from foreign net operating loss carryforwards from an acquisition. As of December 31, 2017, the Company has fully utilized its U.S. federal net operating loss carryforwards. The Company has foreign net operating loss carryforwards of approximately $22.4 million, which can be carried forward indefinitely. Approximately $3.6 million of the foreign net operating loss carryforwards relate to a prior acquisition, the utilization of which is subject to limitation under the tax law of the United Kingdom. As of December 31, 2017, the Company had U.S. federal and state capital loss carryforwards of $6.6 million, of which $0.4 million expires in 2018, $1.6 million expires in 2020, $1.4 million expires in 2021, and $3.2 million expires in 2022. The following table provides a summary of the changes in the deferred tax valuation allowance for the years ended December 31, 2017, 2016 and 2015 (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Deferred tax valuation allowance at January 1 |  | $ | 2,193 |  |  | $ | 1,534 |  |  | $ | 1,565 |
Additions |  |  | 1,439 |  |  |  | 1,256 |  |  |  | 150 |
Deductions |  |  | (70 | ) |  |  | (455 | ) |  |  | (134 | )
Change in tax legislation |  |  | (954 | ) |  |  | — |  |  |  | — |
Translation adjustments |  |  | 78 |  |  |  | (142 | ) |  |  | (47 | )
Deferred tax valuation allowance at December 31 |  | $ | 2,686 |  |  | $ | 2,193 |  |  | $ | 1,534 |
The A ct i n c l ud es a ma nd a t o ry on e-time t ax on acc umu l a t ed ea r n i ngs of f o r e i gn subsi d i a r i es, a nd as a r esu lt, a ll p r e v i ously un r emitt ed ea r n i ngs f or w h i ch no U.S. d e f e rr ed t ax li a b ility h ad b een acc r u ed h a ve now b een sub j ect to U.S. t a x. N o t w it hst a nd i ng t he U.S. t a x a ti on of t h ese amoun ts, the Company provisionally i n t e nds to c on ti nue to i nv est a ll of t h ese ea r n i ngs, as w e ll as the ca p it al in t h ese subsi d i a r i es, i nd e f i n it e ly ou tsi de of t he U.S. a nd does not e xp ect to i n c ur a ny si gn i f i ca n t, a dd iti on al taxes r e l a t ed to su ch amoun ts. The Company utilizes a two-step process for the measurement of uncertain tax positions that have been taken or are expected to be taken on a tax return. The first step is a determination of whether the tax position should be recognized in the financial statements. The second step determines the measurement of the tax position. A reconciliation of the beginning and ending amount of unrecognized tax benefits is summarized as follows for the years ended December 31, 2017, 2016 and 2015 (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Unrecognized tax benefits at January 1 |  | $ | 1,774 |  |  | $ | 1,910 |  |  | $ | 2,136 |
Additions for tax positions of prior years |  |  | — |  |  |  | — |  |  |  | 36 |
Reductions for tax positions of prior years |  |  | — |  |  |  | (31 | ) |  |  | — |
Additions for tax positions of current year |  |  | — |  |  |  | 75 |  |  |  | 46 |
Settlements |  |  | (986 | ) |  |  | (163 | ) |  |  | (303 | )
Lapse of statute of limitations |  |  | — |  |  |  | — |  |  |  | — |
Translation adjustments |  |  | 18 |  |  |  | (17 | ) |  |  | (5 | )
Unrecognized tax benefits at December 31 |  | $ | 806 |  |  | $ | 1,774 |  |  | $ | 1,910 |
As of December 31, 2017, the total amount of unrecognized tax benefits totaled approximately $0.8 million, all of which if recognized, would decrease our effective tax rate in a future period. It is reasonably possible that $0.4 million of this amount may be settled within the next 12 months as the Company expects to reach a settlement with U.S. Competent Authority on the treatment of a prior year foreign tax payment. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense and such amounts were not significant in the years ended December 31, 2017, 2016 and 2015. At December 31, 2016 and 2015, the Company had $0.1 million and $0.2 million, respectively, of accrued interest and penalties related to uncertain tax positions. Accrued interest and penalties were insignificant at December 31, 2017. The Company files income tax returns in the U.S. and in foreign jurisdictions. Generally, the Company is no longer subject to U.S., state, local and foreign income tax examinations by tax authorities in its major jurisdictions for years before 2012, except to the extent of net operating loss and tax credit carryforwards from those years. Major taxing jurisdictions include the U.S., the Netherlands, the United Kingdom, Germany and Switzerland. As of December 31, 2017, the Company was not under any audits.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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