XML 55 R16.htm IDEA: XBRL DOCUMENT
v3.20.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8 - Income Taxes Income before income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | (14,637 | ) |  | $ | 17,718 |  |  | $ | 20,061 |
Foreign |  |  | 5,038 |  |  |  | 5,807 |  |  |  | 7,310 |
Total |  | $ | (9,599 | ) |  | $ | 23,525 |  |  | $ | 27,371 |
The components of the income tax expense (benefit) are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 618 |  |  | $ | 2,278 |  |  | $ | 2,587 |
State |  |  | 911 |  |  |  | 1,173 |  |  |  | 1,060 |
Foreign |  |  | 2,399 |  |  |  | 1,763 |  |  |  | 2,159 |
Total current |  |  | 3,928 |  |  |  | 5,214 |  |  |  | 5,806 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (1,454 | ) |  |  | 2,111 |  |  |  | 5,550 |
State |  |  | (2,005 | ) |  |  | 667 |  |  |  | 700 |
Foreign |  |  | (498 | ) |  |  | 153 |  |  |  | 175 |
Total deferred |  |  | (3,957 | ) |  |  | 2,931 |  |  |  | 6,425 |
Income tax expense (benefit) |  | $ | (29 | ) |  | $ | 8,145 |  |  | $ | 12,231 |
A reconciliation of the federal statutory rate to Forrester’s effective tax rate is as follows:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Income tax provision at federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State tax provision, net of federal benefit |  |  | 8.3 |  |  |  | 6.2 |  |  |  | 4.0 |
Foreign tax rate differential |  |  | 0.4 |  |  |  | (0.2 | ) |  |  | (3.4 | )
Stock option compensation deduction |  |  | (1.2 | ) |  |  | (1.1 | ) |  |  | 0.1 |
Withholding taxes |  |  | (3.5 | ) |  |  | 2.1 |  |  |  | 1.7 |
Non-deductible expenses |  |  | (9.8 | ) |  |  | 5.3 |  |  |  | 1.8 |
Change in valuation allowance |  |  | 2.3 |  |  |  | — |  |  |  | 3.9 |
Foreign subsidiary income subject to U.S. tax |  |  | (7.4 | ) |  |  | — |  |  |  | — |
Change in tax legislation |  |  | (1.2 | ) |  |  | 1.9 |  |  |  | 5.8 |
Audit settlements |  |  | (8.3 | ) |  |  | — |  |  |  | (4.0 | )
Other, net |  |  | (0.3 | ) |  |  | (0.6 | ) |  |  | (0.2 | )
Effective tax rate |  |  | 0.3 | % |  |  | 34.6 | % |  |  | 44.7 | %
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. In December 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 in reasonable detail to complete the accounting for certain income tax effects of the Act. SAB 118 provided a measurement period of one year from the enactment date of the Act for companies to complete the accounting for the income tax effects of the Act. During 2017, the Company recorded provisional income tax for the remeasurement of federal deferred tax assets and liabilities of $1.2 million and 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. The Company completed its analysis of the effect of the Act during 2018 in accordance with SAB 118 and recorded additional tax expense of $0.4 million in the fourth quarter of 2018 relating to the one-time transition tax on the mandatory repatriation of foreign earnings. The Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain of its foreign subsidiaries. The FASB Staff Q&A, 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. 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 previously recorded a tax benefit based on the U.S. Tax Court opinion in the case. In June 2019, the U.S. Court of Appeals for Ninth Circuit reversed the U.S. Tax Court’s decision. Altera Corp. submitted its appeal for an en banc rehearing before the U.S. Court of Appeals for the Ninth Circuit, which was subsequently denied. Subsequent to December 31, 2019, Altera Corp. submitted a request to the Supreme Court to accept the case for review, which has yet to be determined. Due to the uncertainty surrounding the status of the current regulations and questions related to jurisdiction as the Company does not reside in the Ninth Circuit, the Company has determined no adjustment is required to the consolidated financial statements as a result of the ruling. The potential impact of an adverse ruling in the case is not expected to be material to the Company’s consolidated financial statements. The Company will continue to monitor ongoing developments. The components of deferred income taxes are as follows (in thousands):
|  | As of December 31, |
|  | 2019 |  |  | 2018 |
Non-deductible reserves and accruals |  | $ | 2,743 |  |  | $ | 3,835 |
Net operating loss and other carryforwards |  |  | 13,049 |  |  |  | 7,954 |
Stock compensation |  |  | 2,651 |  |  |  | 2,125 |
Depreciation and amortization |  |  | — |  |  |  | 727 |
Lease liability |  |  | 17,382 |  |  |  | — |
Gross deferred tax asset |  |  | 35,825 |  |  |  | 14,641 |
Less - valuation allowance |  |  | (2,274 | ) |  |  | (2,574 | )
Sub-total |  |  | 33,551 |  |  |  | 12,067 |
Other liabilities |  |  | (1,085 | ) |  |  | (1,249 | )
Depreciation and amortization |  |  | (1,567 | ) |  |  | — |
Goodwill and intangible assets |  |  | (32,120 | ) |  |  | (6,201 | )
Operating lease right-of-use assets |  |  | (15,005 | ) |  |  | — |
Deferred commissions |  |  | (5,706 | ) |  |  | (4,479 | )
Net deferred tax asset (liability) |  | $ | (21,932 | ) |  | $ | 138 |
As of December 31, 2019 and 2018, long-term net deferred tax assets were $1.0 million and $1.1 million, respectively, and are included in other assets in the Consolidated Balance Sheets. Long-term net deferred tax liabilities were $22.9 million and $1.0 million, respectively, at December 31, 2019 and 2018, 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, 2019 and 2018, the Company maintained a valuation allowance of approximately $2.3 million and $2.6 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, 2019, the Company had U.S. federal net operating loss carryforwards of approximately $18.5 million obtained from acquired businesses. These carryforwards are limited pursuant to section 382 of the Internal Revenue Code due to changes in ownership as a result of the acquisitions. The Act allows U.S. federal net operating loss carryforwards resulting from taxable years beginning after December 31, 2017 to be carried forward indefinitely and can be used to offset 80% of U.S. taxable income. The Company has foreign net operating loss carryforwards of approximately $24.1 million, which can be carried forward indefinitely. Approximately $3.4 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, 2019, the Company had U.S. federal and state capital loss carryforwards of $5.2 million, of which $0.6 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, 2019, 2018, and 2017 (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Deferred tax valuation allowance at January 1 |  | $ | 2,574 |  |  | $ | 2,686 |  |  | $ | 2,193 |
Additions |  |  | 30 |  |  |  | 74 |  |  |  | 1,439 |
Deductions |  |  | (356 | ) |  |  | (139 | ) |  |  | (70 | )
Change in tax legislation |  |  | — |  |  |  | — |  |  |  | (954 | )
Translation adjustments |  |  | 26 |  |  |  | (47 | ) |  |  | 78 |
Deferred tax valuation allowance at December 31 |  | $ | 2,274 |  |  | $ | 2,574 |  |  | $ | 2,686 |
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. The Company will generally be free of additional U.S. federal tax consequences on additional unremitted foreign earnings that have been subject to U.S. tax primarily through GILTI or would be eligible for a dividends received deduction implemented as part of the Act for earnings distributed after January 1, 2018. 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 i n t e nds to c on ti nue to i nv est all of their unremitted earnings of $19.2 million, 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. unless there are opportunities in the future to repatriate in a tax efficient manner. The Company does not e xp ect to i n c ur a ny material, 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, 2019, 2018, and 2017 (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Unrecognized tax benefits at January 1 |  | $ | 799 |  |  | $ | 806 |  |  | $ | 1,774 |
Reductions for tax positions of prior years |  |  | (458 | ) |  |  | — |  |  |  | — |
Additions for tax positions of current year |  |  | — |  |  |  | — |  |  |  | - |
Settlements |  |  | — |  |  |  |  |  |  |  | (986 | )
Translation adjustments |  |  | 4 |  |  |  | (7 | ) |  |  | 18 |
Unrecognized tax benefits at December 31 |  | $ | 345 |  |  | $ | 799 |  |  | $ | 806 |
As of December 31, 2019, the total amount of unrecognized tax benefits totaled approximately $0.3 million, all of which if recognized, would decrease our effective tax rate in a future period. The Company expects that the liability for unrecognized tax benefits could decrease by up to $0.3 million within the next 12 months due to expiration of certain statutes of limitation. 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, 2019, 2018, and 2017. Accrued interest and penalties were insignificant at December 31, 2019, 2018, and 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 2014, 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. During 2019, the Company recorded a $0.3 million tax expense to settle a foreign tax audit. As of December 31, 2019, the Company has one non-U.S. subsidiary under audit.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration