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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8 - Income Taxes Income before income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Domestic |  | $ | 7,237 |  |  | $ | (14,637 | ) |  | $ | 17,718 |
Foreign |  |  | 5,696 |  |  |  | 5,038 |  |  |  | 5,807 |
Total |  | $ | 12,933 |  |  | $ | (9,599 | ) |  | $ | 23,525 |
The components of the income tax expense (benefit) are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 603 |  |  | $ | 618 |  |  | $ | 2,278 |
State |  |  | 2,054 |  |  |  | 911 |  |  |  | 1,173 |
Foreign |  |  | 1,963 |  |  |  | 2,399 |  |  |  | 1,763 |
Total current |  |  | 4,620 |  |  |  | 3,928 |  |  |  | 5,214 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 490 |  |  |  | (1,454 | ) |  |  | 2,111 |
State |  |  | (1,641 | ) |  |  | (2,005 | ) |  |  | 667 |
Foreign |  |  | (526 | ) |  |  | (498 | ) |  |  | 153 |
Total deferred |  |  | (1,677 | ) |  |  | (3,957 | ) |  |  | 2,931 |
Income tax expense (benefit) |  | $ | 2,943 |  |  | $ | (29 | ) |  | $ | 8,145 |
A reconciliation of the federal statutory rate to Forrester’s effective tax rate is as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Income tax provision at federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State tax provision, net of federal benefit |  |  | 2.6 |  |  |  | 8.3 |  |  |  | 6.2 |
Foreign tax rate differential |  |  | (0.2 | ) |  |  | 0.4 |  |  |  | (0.2 | )
Stock option compensation |  |  | 5.7 |  |  |  | (1.2 | ) |  |  | (1.1 | )
Withholding taxes |  |  | 3.3 |  |  |  | (3.5 | ) |  |  | 2.1 |
Non-deductible expenses |  |  | 2.2 |  |  |  | (9.8 | ) |  |  | 5.3 |
Change in valuation allowance |  |  | (5.8 | ) |  |  | 2.3 |  |  |  | — |
Foreign subsidiary income subject to U.S. tax |  |  | (4.3 | ) |  |  | (7.4 | ) |  |  | — |
Change in tax legislation |  |  | (1.9 | ) |  |  | (1.2 | ) |  |  | 1.9 |
Audit settlements |  |  | — |  |  |  | (8.3 | ) |  |  | — |
Other, net |  |  | 0.2 |  |  |  | (0.3 | ) |  |  | (0.6 | )
Effective tax rate |  |  | 22.8 | % |  |  | 0.3 | % |  |  | 34.6 | %
The increase in the effective tax rate during 2020 as compared to the prior year was primarily due to the resolution of an audit in 2019 that did not recur in 2020, utilization of valuation allowance on capital assets during 2020, a decrease of non-deductible expenses during 2020, and windfalls related to stock based compensation during 2019 that did not recur in 2020. The components of deferred income taxes are as follows (in thousands):
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
Non-deductible reserves and accruals |  | $ | 2,814 |  |  | $ | 2,743 |
Net operating loss and other carryforwards |  |  | 8,719 |  |  |  | 13,049 |
Stock compensation |  |  | 1,935 |  |  |  | 2,651 |
Lease liability |  |  | 22,842 |  |  |  | 17,382 |
Gross deferred tax asset |  |  | 36,310 |  |  |  | 35,825 |
Less - valuation allowance |  |  | (1,237 | ) |  |  | (2,274 | )
Sub-total |  |  | 35,073 |  |  |  | 33,551 |
Other liabilities |  |  | (751 | ) |  |  | (1,085 | )
Depreciation and amortization |  |  | (1,091 | ) |  |  | (1,567 | )
Goodwill and intangible assets |  |  | (27,319 | ) |  |  | (32,120 | )
Operating lease right-of-use assets |  |  | (19,201 | ) |  |  | (15,005 | )
Deferred commissions |  |  | (6,665 | ) |  |  | (5,706 | )
Net deferred tax asset (liability) |  | $ | (19,954 | ) |  | $ | (21,932 | )
As of December 31, 2020 and 2019, long-term net deferred tax assets were $1.6 million and $1.0 million, respectively, and are included in other assets in the Consolidated Balance Sheets. Long-term net deferred tax liabilities were $21.5 million and $22.9 million, respectively, at December 31, 2020 and 2019, and are included in non-current liabilities in the Consolidated Balance Sheets. As of December 31, 2020, the Company has fully utilized its U.S. federal net operating loss carryforwards. The U.S. federal net operating loss carryforwards resulting from taxable years beginning after December 31, 2017 can 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 $27.6 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, 2020, the Company has U.S. federal and state capital loss carryforwards of $1.2 million, which expire in 2022. 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, 2020 and 2019, the Company maintained a valuation allowance of approximately $1.2 million and $2.3 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. The following table provides a summary of the changes in the deferred tax valuation allowance for the years ended December 31, 2020, 2019, and 2018 (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Deferred tax valuation allowance at January 1 |  | $ | 2,274 |  |  | $ | 2,574 |  |  | $ | 2,686 |
Additions |  |  | 52 |  |  |  | 30 |  |  |  | 74 |
Deductions |  |  | (1,134 | ) |  |  | (356 | ) |  |  | (139 | )
Change in tax legislation |  |  | 2 |  |  |  | — |  |  |  | — |
Translation adjustments |  |  | 43 |  |  |  | 26 |  |  |  | (47 | )
Deferred tax valuation allowance at December 31 |  | $ | 1,237 |  |  | $ | 2,274 |  |  | $ | 2,574 |
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 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 its unremitted earnings of $25.6 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, 2020, 2019, and 2018 (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Unrecognized tax benefits at January 1 |  | $ | 345 |  |  | $ | 799 |  |  | $ | 806 |
Reductions for tax positions of prior years |  |  | (344 | ) |  |  | (458 | ) |  |  | — |
Additions for tax positions of current year |  |  | — |  |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | — |  |  |  | — |
Translation adjustments |  |  | 27 |  |  |  | 4 |  |  |  | (7 | )
Unrecognized tax benefits at December 31 |  | $ | 28 |  |  | $ | 345 |  |  | $ | 799 |
As of December 31, 2020, the total amount of unrecognized tax benefits totaled approximately $28 thousand, all of which, if recognized, would decrease our effective tax rate in a future period. The Company does not expect the liability for unrecognized tax benefits to change materially 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, 2020, 2019, and 2018. Accrued interest and penalties were insignificant at December 31, 2020, 2019, and 2018. 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 2015, 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, 2020, the Company has one non-U.S. subsidiary under audit.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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