Income Taxes

12 Months Ended

Dec. 31, 2020

12.	Income Taxes

The components of income before income taxes as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2020, 2019 and 2018:


	Years Ended December 31,
	2020		2019		2018
	(Amounts in thousands)
Income before income taxes:
Domestic	$	11,476	$	6,787	$	7,520
Foreign		1,157		8,432		1,894

Income before income taxes	$	12,633	$	15,219	$	9,414

The Company has foreign subsidiaries which generate revenues from foreign clients. Additionally, the Company has foreign subsidiaries which provide services to its U.S. operations. Accordingly, the Company allocates a portion of its income to these subsidiaries based on a “transfer pricing” model and reports such income as foreign in the above table.

The provision for income taxes, as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2020, 2019 and 2018:


	Years Ended December 31,
	2020			2019			2018
	(Amounts in thousands)
Current provision:
Federal	$	3,044		$	1,555		$	1,494
State		752			406			273
Foreign		797			751			807

Total current provision		4,593			2,712			2,574

Deferred provision (benefit):
Federal		(1,340	)		(13	)		317
State		(327	)		(4	)		96
Foreign		(326	)		1,372			(264	)

Total deferred provision (benefit)		(1,993	)		1,355			149

Change in valuation allowance		172			7			—

Total provision for income taxes	$	2,772		$	4,074		$	2,723

The reconciliation of income taxes computed using our statutory U.S. income tax rate and the provision for income taxes for the years ended December 31, 2020, 2019 and 2018 were as follows:


	Years Ended December 31,
(Amounts in thousands)	2020					2019					2018
Income taxes computed at the federal statutory rate	$	2,653		21.0	%	$	3,196		21.0	%	$	1,977		21.0	%
State income taxes, net of federal tax benefit		602		4.7			404		2.7			387		4.1
Excess tax benefits from stock options/restricted shares		(920	)	(7.3	)		(9	)	(0.1	)		(93	)	(1.0	)
Estimated charge for U.S. tax reform		—		—			—		—			251		2.7
Charge for global intangible low-taxed income (“GILTI”)		(20	)	(0.2	)		69		0.5			—		—
Difference in tax rate on foreign earnings/other		285		2.3			407		2.7			201		2.1
Change in valuation allowance		172		1.4			7		—			—		—

	$	2,772		21.9	%	$	4,074		26.8	%	$	2,723		28.9	%

The components of the deferred tax assets and liabilities were as follows:


	At December 31,
	2020			2019
	(Amounts in thousands)
Deferred tax assets:
Allowance for doubtful accounts	$	101		$	88
Accrued vacation and bonuses		457			315
Stock-based compensation expense		738			396
COVID-19 payroll tax deferment		1,207			—
Acquisition-related transaction costs		515			414
Net operating losses		179			7

Total deferred tax assets		3,197			1,220

Deferred tax liabilities:
Prepaid expenses		217			221
Depreciation, intangibles and contingent consideration		2,005			2,017

Total deferred tax liabilities		2,222			2,238
Valuation allowance		(179	)		(7	)

Net deferred tax asset (liability)	$	796		$	(1,025	)

A reconciliation of the beginning and ending amounts of unrecognized tax benefits related to uncertain tax positions, including interest and penalties, for the three years ended December 31, 2020 is as follows:


	Years Ended December 31,
(Amounts in thousands)	2020			2019			2018
Unrecognized tax benefits, beginning balance	$	20		$	263		$	95
Additions related to current period		—			—			208
Additions related to prior periods		—			—			—
Reductions related to prior periods		(20	)		(243	)		(40	)

Unrecognized tax benefits, ending balance	$	—		$	20		$	263

We evaluate deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires us to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative using a “more likely than not” standard. Our assessment considers, among other things, the nature of cumulative losses; forecast of future profitability; the duration of statutory carry-forward periods and tax planning alternatives. At December 31, 2020, our valuation allowance was comprised of balances within locations of Singapore and the United Kingdom. The valuation allowance balances at these locations totaled $179,000 and $7,000 as of December 31, 2020 and 2019, respectively, and reflect net operating losses which may not be realizable in the future.

- 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.

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