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Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
10.
Income Taxes
The components of income before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2022 and 2021:
 
    
Three Months Ended

September 30,
     
Nine Months Ended

September 30,
  
    
2022
     
2021
     
2022
     
2021
  
                             
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Income before income taxes:
                                    
Domestic
    $ 3,950      $ 4,644      $ 11,123      $ 12,091  
Foreign
      (593 )       96        (903 )       (547 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
Income before income taxes
    $ 3,357      $ 4,740      $ 10,220      $ 11,544  
    
 
 
     
 
 
     
 
 
     
 
 
  
The Company has subsidiaries organized in jurisdictions outside the United States, which generate revenues from
non-U.S.-based
clients. Additionally, these subsidiaries provide services to the Company’s U.S. parents. 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 Financial Statements, consisted of the following for the three and nine months ended September 30, 2022 and 2021:

 
 
Three Months Ended

September 30,
 
 
Nine Months Ended

September 30,
 
 
 
2022
 
 
2021
 
 
2022
 
 
2021
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Amounts in thousands)
 
 
(Amounts in thousands)
 
Current provision:
                                    
Federal
    $ 806      $ 550      $ 1,836      $ 1,809  
State
      187        133        446        437  
Foreign
      (55 )       195        (4 )       179  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total current provision
    $ 938      $ 878      $ 2,278      $ 2,425  
    
 
 
     
 
 
     
 
 
     
 
 
  
Deferred provision (benefit):
                                    
Federal
      12        372        496        659  
State
      (7 )       105        118        173  
Foreign
      (60 )       (41 )       (118 )       (140 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total deferred provision (benefit)
      (55 )       436        496        692  
    
 
 
     
 
 
     
 
 
     
 
 
  
Change in valuation allowance
      68        20        272        89  
    
 
 
     
 
 
     
 
 
     
 
 
  
Total provision for income taxes
    $ 951      $ 1,334      $ 3,046      $ 3,206  
    
 
 
     
 
 
     
 
 
     
 
 
  
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes for the three and nine months ended September 30, 2022 and 2021 were as follows (amounts in thousands):

 
  
Three Months Ended

September 30, 2022
 
 
Three Months Ended

September 30, 2021
 
 
  
 
 
 
 
 
Income taxes computed at the federal statutory rate
    $ 705        21.0 %    $ 995        21.0 % 
State income taxes, net of federal tax benefit
      168        5.0       238        5.0  
Excess tax benefit from stock options/restricted shares
      19        0.6       —          —    
Difference in income tax rate on foreign earnings
      (9 )       (0.3 )      81        1.7  
Change in valuation allowance
      68        2.0       20        0.4  
    
 
 
     
 
 
    
 
 
     
 
 
  
     $ 951        28.3 %    $ 1,334        28.1 % 
    
 
 
     
 
 
    
 
 
     
 
 
  
 
    
Nine Months Ended

September 30, 2022
    
Nine Months Ended

September 30, 2021
  
Income taxes computed at the federal statutory rate
    $ 2,146        21.0 %    $ 2,424        21.0 % 
State income taxes, net of federal tax benefit
      554        5.4       619        5.4  
Excess tax benefit from stock options/restricted shares
      10        0.1       (48 )       (0.4 ) 
Difference in income tax rate on foreign earnings
      64        0.6       122        1.1  
Change in valuation allowance
      272        2.7       89        0.7  
    
 
 
     
 
 
    
 
 
     
 
 
  
     $ 3,046        29.8 %    $ 3,206        27.8 % 
    
 
 
     
 
 
    
 
 
     
 
 
  
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 September 30, 2022, our valuation allowance was comprised of balances within locations of Singapore, the United Kingdom and Ireland. The valuation allowance balances at these locations totaled $583,000 and $311,000 as of September 30, 2022 and December 31, 2021, respectively, and reflect net operating losses which may not be realizable in the future. In the third quarter of 2022, the Company decided to close the Singapore and Ireland operations.
 
The Company’s Canadian subsidiary is currently under audit by Revenue Canada for the years 2018 and 2019.