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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10 – Income Taxes

Income before income taxes consists of the following (in thousands):

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Domestic

 

$

(1,775

)

 

$

(4,058

)

 

$

16,552

 

Foreign

 

 

4,412

 

 

 

10,343

 

 

 

14,172

 

Total

 

$

2,637

 

 

$

6,285

 

 

$

30,724

 

 

The components of the income tax expense are as follows (in thousands):

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

2,874

 

 

$

3,867

 

 

$

9,349

 

State

 

 

613

 

 

 

1,922

 

 

 

3,819

 

Foreign

 

 

4,955

 

 

 

2,907

 

 

 

2,402

 

Total current

 

 

8,442

 

 

 

8,696

 

 

 

15,570

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(636

)

 

 

(3,872

)

 

 

(5,513

)

State

 

 

763

 

 

 

(1,597

)

 

 

(1,788

)

Foreign

 

 

(185

)

 

 

8

 

 

 

649

 

Total deferred

 

 

(58

)

 

 

(5,461

)

 

 

(6,652

)

Income tax expense

 

$

8,384

 

 

$

3,235

 

 

$

8,918

 

 

A reconciliation of the federal statutory rate to Forrester’s effective tax rate is as follows:

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

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

 

 

40.6

 

 

 

8.1

 

 

 

5.2

 

Foreign tax rate differential

 

 

37.7

 

 

 

2.7

 

 

 

(0.5

)

Stock compensation

 

 

66.6

 

 

 

17.5

 

 

 

0.9

 

Withholding taxes

 

 

31.7

 

 

 

6.2

 

 

 

1.7

 

Non-deductible expenses

 

 

23.1

 

 

 

8.1

 

 

 

1.5

 

Goodwill related to sale of FeedbackNow

 

 

93.9

 

 

 

—

 

 

 

—

 

Permanent differences

 

 

(0.1

)

 

 

(1.7

)

 

 

(0.3

)

Change in valuation allowance

 

 

0.4

 

 

 

0.5

 

 

 

1.0

 

Foreign subsidiary income subject to U.S. tax

 

 

(1.6

)

 

 

1.2

 

 

 

1.3

 

Foreign-derived intangible income benefit

 

 

1.1

 

 

 

(3.8

)

 

 

(0.7

)

Change in tax legislation

 

 

—

 

 

 

(8.1

)

 

 

(1.6

)

Foreign exchange gain (loss) on previously taxed earnings and profits

 

 

(0.5

)

 

 

1.6

 

 

 

—

 

Currency translation gain (loss)

 

 

3.6

 

 

 

0.7

 

 

 

(0.1

)

Other, net

 

 

0.4

 

 

 

(2.5

)

 

 

(0.4

)

Effective tax rate

 

 

317.9

 %

 

 

51.5

 %

 

 

29.0

 %

The significant items impacting the effective tax rate during 2024 as compared to 2023 are primarily due to 1) tax expense from the non-deductible goodwill related to the sale of the FeedbackNow product line of $2.5 million, 2) tax expense from the settlement of share-based awards of $1.8 million, 3) foreign withholding taxes of $0.8 million, and 4) state tax expense of $0.6 million related to the write-off of non-realizable state NOL carryforwards due to the dissolution of a domestic subsidiary.

The components of deferred income taxes are as follows (in thousands):

 

 

 

As of December 31,

 

 

 

2024

 

 

2023

 

Non-deductible reserves and accruals

 

$

1,776

 

 

$

3,077

 

Net operating loss and other carryforwards

 

 

5,525

 

 

 

6,262

 

Stock compensation

 

 

2,085

 

 

 

2,676

 

Depreciation and amortization

 

 

3,485

 

 

 

435

 

Lease liability

 

 

8,562

 

 

 

12,276

 

Gross deferred tax asset

 

 

21,433

 

 

 

24,726

 

Less - valuation allowance

 

 

(1,055

)

 

 

(1,065

)

Sub-total

 

 

20,378

 

 

 

23,661

 

Other liabilities

 

 

(2,553

)

 

 

(733

)

Goodwill and intangible assets

 

 

(13,837

)

 

 

(15,181

)

Operating lease right-of-use assets

 

 

(5,822

)

 

 

(9,163

)

Deferred commissions

 

 

(6,071

)

 

 

(6,545

)

Net deferred tax liability

 

$

(7,905

)

 

$

(7,961

)

As of December 31, 2024 and 2023, long-term net deferred tax assets were $0.8 million and $0.7 million, respectively, and are included in other assets in the Consolidated Balance Sheets. Long-term net deferred tax liabilities were $8.7 million at December 31, 2024 and 2023, and are included in non-current liabilities in the Consolidated Balance Sheets.

As of December 31, 2024, the Company has fully utilized its U.S. federal net operating loss carryforwards. In addition, the Company has no U.S. federal or state capital loss carryforwards.

The Company has foreign net operating loss carryforwards of approximately $17.4 million, which can be carried forward indefinitely. Approximately $3.2 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.

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, 2024 and 2023, the Company maintained a valuation allowance of approximately $1.1 million, primarily relating to foreign net operating loss carryforwards from an acquisition, and as of December 31, 2022, also from U.S. capital losses from the Company’s investment in technology-related private equity funds.

The following table provides a summary of the changes in the deferred tax valuation allowance for the years ended December 31, 2024, 2023, and 2022 (in thousands):

 

 

 

2024

 

 

2023

 

 

2022

 

Deferred tax valuation allowance at January 1

 

$

1,065

 

 

$

989

 

 

$

1,114

 

Additions

 

 

19

 

 

 

39

 

 

 

106

 

Deductions

 

 

(8

)

 

 

—

 

 

 

(336

)

Change in tax legislation

 

 

—

 

 

 

(4

)

 

 

186

 

Translation adjustments

 

 

(21

)

 

 

41

 

 

 

(81

)

Deferred tax valuation allowance at December 31

 

$

1,055

 

 

$

1,065

 

 

$

989

 

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 or would be eligible for a dividends received deduction for earnings distributed after January 1, 2018. Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest all of its unremitted earnings of $38.3 million, as well as the capital in these subsidiaries, indefinitely outside of the U.S. unless there are opportunities in the future to repatriate in a tax efficient manner. The Company does not expect to incur any material, additional taxes related to such amounts.

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, 2024, 2023, and 2022 (in thousands):

 

 

2024

 

 

2023

 

 

2022

 

Unrecognized tax benefits at January 1

 

$

—

 

 

$

—

 

 

$

5

 

Reductions for tax positions of prior years

 

 

—

 

 

 

—

 

 

 

(4

)

Translation adjustments

 

 

—

 

 

 

—

 

 

 

(1

)

Unrecognized tax benefits at December 31

 

$

—

 

 

$

—

 

 

$

—

 

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 2017, 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, 2024, the Company has no jurisdictions under audit.