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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
11.
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, 2023, 2022 and 2021:

 
  
Years Ended December 31,
 
 
  
2023
 
  
2022
 
  
2021
 
 
  
(Amounts in thousands)
 
Income (loss) before income taxes:
         
Domestic
    $ (6,222 )     $ 13,892      $ 17,117  
Foreign
      (2,809 )       (1,401 )       (231 ) 
  
 
 
     
 
 
     
 
 
  
Income (loss) before income taxes
    $ (9,031 )     $ 12,491      $ 16,886  
  
 
 
     
 
 
     
 
 
  
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 (benefit) for income taxes, as shown in the accompanying Consolidated Statement of Operations, consisted of the following for the years ended December 31, 2023, 2022 and 2021:
 
 
  
Years Ended December 31,
 
 
  
2023
 
  
2022
 
  
2021
 
 
  
(Amounts in thousands)
 
Current provision (benefit):
  
  
  
Federal
  
$
(473
) 
  
$
2,293
 
  
$
2,657
 
State
  
 
(23
) 
  
 
653
 
  
 
713
 
Foreign
  
 
316
 
  
 
178
 
  
 
234
 
  
 
 
 
  
 
 
 
  
 
 
 
Total current provision (benefit)
  
 
(180
) 
  
 
3,124
 
  
 
3,604
 
  
 
 
 
  
 
 
 
  
 
 
 
Deferred provision (benefit):
  
  
  
Federal
      (648 )       678        873  
State
      (133 )       162        233  
Foreign
      (1,001 )       (433 )       (177 ) 
  
 
 
     
 
 
     
 
 
  
Total deferred provision (benefit)
      (1,782 )       407        929  
  
 
 
     
 
 
     
 
 
  
Change in valuation allowance
      69        248        132  
  
 
 
     
 
 
     
 
 
  
Total provision (benefit) for income taxes
    $ (1,893 )     $ 3,779      $ 4,665  
  
 
 
     
 
 
     
 
 
  
The reconciliation of income taxes computed using our statutory U.S. income tax rate and the provision (benefit) for income taxes for the years ended December 31, 2023, 2022 and 2021 were as follows:
 
 
 
Years Ended December 31,
 
(Amounts in thousands)
 
2023
 
 
2022
 
 
2021
 
Income taxes computed at the federal statutory rate
 
$
(1,897
) 
 
 
(21.0
%) 
 
$
2,623
 
 
 
21.0
% 
 
$
3,546
 
 
 
21.0
% 
State income taxes, net of federal tax benefit
 
 
(198
) 
 
 
(2.2
) 
 
 
804
 
 
 
6.4
 
 
 
962
 
 
 
5.7
 
Excess tax benefits from stock options/restricted shares
 
 
220
 
 
 
2.4
 
 
 
56
 
 
 
0.5
 
 
 
(82
) 
 
 
(0.5
) 
Difference in tax rate on foreign earnings/other
 
 
(87
) 
 
 
(1.0
) 
 
 
48
 
 
 
0.4
 
 
 
107
 
 
 
0.6
 
Change in valuation allowance
 
 
69
 
 
 
0.8
 
 
 
248
 
 
 
2.0
 
 
 
132
 
 
 
0.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$(1,893)
 
 
(21.0%)
 
 
$3,779
 
 
30.3%
 
 
$4,665
 
 
27.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The components of the deferred tax assets and liabilities were as follows:
 
    
At December 31,
  
    
2023
     
2022
  
    
(Amounts in thousands)
  
Deferred tax assets:
      
Allowance for credit losses
    $ 150      $ 126  
Accrued vacation and bonuses
      437        342  
Stock-based compensation expense
      2,100        1,692  
Acquisition-related transaction costs
      471        509  
Net operating losses
      628        559  
  
 
 
     
 
 
  
Total deferred tax assets
      3,786        3,228  
  
 
 
     
 
 
  
Deferred tax liabilities:
      
Prepaid expenses
      488        441  
Depreciation, intangibles and contingent consideration
      1,877        3,148  
  
 
 
     
 
 
  
Total deferred tax liabilities
      2,365        3,589  
Valuation allowance
      (628 )       (559 ) 
  
 
 
     
 
 
  
Net
deferred tax asset (liability)
    $ 793      $ (920 ) 
  
 
 
     
 
 
  
 
For the three years ended December 31, 2023, the Company had no unrecognized tax benefits related to uncertain tax positions.
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, 2023 and 2022, our valuation allowance was comprised of balances within locations of Singapore, Ireland and the United Kingdom. The valuation allowance balances at these locations totaled $
628
,000, $
559
,000 and $
311
,000 as of December 31, 2023, 2022 and 2021, respectively, and reflect net operating losses which may not be realizable in the future.
The income tax returns of the Company’s Canadian subsidiary for the 2018 and 2019 tax years are currently under audit by the Canadian taxing authorities.