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Income Taxes | 6 Months Ended
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Jun. 30, 2023
Income Tax Disclosure [Abstract] |
Income Taxes |
9. | Income Taxes
The components of income (loss) before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and six months ended June 30, 2023 and 2022:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | (Amounts in thousands) |  |  | (Amounts in thousands) |
Income (loss) before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (5,074 | ) |  | $ | 3,858 |  |  | $ | (2,994 | ) |  | $ | 7,173 |
Foreign |  |  | 2,296 |  |  |  | (242 | ) |  |  | 695 |  |  |  | (310 | )
Income (loss) before income taxes |  | $ | (2,778 | ) |  | $ | 3,616 |  |  | $ | (2,299 | ) |  | $ | 6,863 |
The Company has foreign subsidiaries which generate revenues from non-U.S.-based clients. Additionally, these subsidiaries provide services to the Company’s U.S. operations. Accordingly, the Company allocates a portion of its income (loss) to these subsidiaries based on a “transfer pricing” model and reports such income (loss) as foreign in the above table. The provision (benefit) for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and six months ended June 30, 2023 and 2022:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | (Amounts in thousands) |  |  | (Amounts in thousands) |
Current provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (894 | ) |  | $ | 932 |  |  | $ | (183 | ) |  | $ | 1,030 |
State |  |  | (136 | ) |  |  | 234 |  |  |  | 34 |  |  |  | 259 |
Foreign |  |  | 591 |  |  |  | (35 | ) |  |  | 145 |  |  |  | 51 |
Total current provision (benefit) |  |  | (439 | ) |  |  | 1,131 |  |  |  | (4 | ) |  |  | 1,340 |
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (154 | ) |  |  | (58 | ) |  |  | (402 | ) |  |  | 484 |
State |  |  | (38 | ) |  |  | (12 | ) |  |  | (98 | ) |  |  | 125 |
Foreign |  |  | (2 | ) |  |  | (2 | ) |  |  | 60 |  |  |  | (58 | )
Total deferred provision (benefit) |  |  | (194 | ) |  |  | (72 | ) |  |  | (440 | ) |  |  | 551 |
Change in valuation allowance |  |  | 28 |  |  |  | 121 |  |  |  | 57 |  |  |  | 204 |
Total provision (benefit) for income taxes |  | $ | (605 | ) |  | $ | 1,180 |  |  | $ | (387 | ) |  | $ | 2,095 |
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes for the three and six months ended June 30, 2023 and 2022 were as follows (amounts in thousands):
|  | Three Months Ended June 30, 2023 |  |  | Three Months Ended June 30, 2022 |
Income taxes computed at the federal statutory rate |  | $ | (583 | ) |  |  | (21.0 | )% |  | $ | 759 |  |  |  | 21.0 | %
State income taxes, net of federal tax benefit |  |  | (182 | ) |  |  | (6.5 | ) |  |  | 210 |  |  |  | 5.8 |
Excess tax expense (benefit) from stock options/restricted shares |  |  | 17 |  |  |  | 0.6 |  |  |  | 68 |  |  |  | 1.9 |
Difference in income tax rate on foreign earnings/other |  |  | 115 |  |  |  | 4.1 |  |  |  | 22 |  |  |  | 0.6 |
Change in valuation allowance |  |  | 28 |  |  |  | 1.0 |  |  |  | 121 |  |  |  | 3.3 |
|  | $ | (605 | ) |  |  | (21.8 | )% |  | $ | 1,180 |  |  |  | 32.6 | %
|  | Six Months Ended June 30, 2023 |  |  | Six Months Ended June 30, 2022 |
Income taxes computed at the federal statutory rate |  | $ | (483 | ) |  |  | (21.0 | )% |  | $ | 1,441 |  |  |  | 21.0 | %
State income taxes, net of federal tax benefit |  |  | (72 | ) |  |  | (3.1 | ) |  |  | 386 |  |  |  | 5.6 |
Excess tax expense (benefit) from stock options/restricted shares |  |  | 40 |  |  |  | 1.7 |  |  |  | (9 | ) |  |  | (0.1 | )
Difference in income tax rate on foreign earnings/other |  |  | 71 |  |  |  | 3.1 |  |  |  | 73 |  |  |  | 1.0 |
Change in valuation allowance |  |  | 57 |  |  |  | 2.5 |  |  |  | 204 |  |  |  | 3.0 |
|  | $ | (387 | ) |  |  | (16.8 | )% |  | $ | 2,095 |  |  |  | 30.5 | %
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 June 30, 2023, our valuation allowance was comprised of balances within locations of Singapore, Ireland and the United Kingdom. The valuation allowance balances at these locations totaled $616,000 and $559,000 as of June 30, 2023, and December 31, 2022, 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.

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