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Income Taxes | 9 Months Ended
--- | ---
Sep. 30, 2024
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 nine months ended September 30, 2024 and 2023:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | (Amounts in thousands) |  |  | (Amounts in thousands) |
Income (loss) before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 1,748 |  |  | $ | (211 | ) |  | $ | 2,047 |  |  | $ | (3,205 | )
Foreign |  |  | 824 |  |  |  | 365 |  |  |  | 2,052 |  |  |  | 1,060 |
Income (loss) before income taxes |  | $ | 2,572 |  |  | $ | 154 |  |  | $ | 4,099 |  |  | $ | (2,145 | )
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 nine months ended September 30, 2024 and 2023:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
|  | (Amounts in thousands) |  |  | (Amounts in thousands) |
Current provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 351 |  |  | $ | (88 | ) |  | $ | 227 |  |  | $ | (271 | )
State |  |  | 77 |  |  |  | (9 | ) |  |  | 64 |  |  |  | 25 |
Foreign |  |  | 216 |  |  |  | 93 |  |  |  | 517 |  |  |  | 238 |
Total current provision (benefit) |  | $ | 644 |  |  | $ | (4 | ) |  | $ | 808 |  |  | $ | (8 | )
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 44 |  |  |  | 25 |  |  |  | 140 |  |  |  | (377 | )
State |  |  | 8 |  |  |  | 7 |  |  |  | 27 |  |  |  | (91 | )
Foreign |  |  | 1 |  |  |  | 4 |  |  |  | 19 |  |  |  | 64 |
Total deferred provision (benefit) |  |  | 53 |  |  |  | 36 |  |  |  | 186 |  |  |  | (404 | )
Change in valuation allowance |  |  | — |  |  |  | (3 | ) |  |  | — |  |  |  | 54 |
Total provision (benefit) for income taxes |  | $ | 697 |  |  | $ | 29 |  |  | $ | 994 |  |  | $ | (358 | )
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 nine months ended September 30, 2024 and 2023 were as follows (amounts in thousands):
|  | Three Months Ended September 30, 2024 |  |  | Three Months Ended September 30, 2023 |
Income taxes computed at the federal statutory rate |  | $ | 540 |  |  |  | 21.0 | % |  | $ | 33 |  |  |  | 21.0 | %
State income taxes, net of federal tax benefit |  |  | 120 |  |  |  | 4.6 |  |  |  | (2 | ) |  |  | (1.2 | )
Excess tax expense (benefit) from stock options/restricted shares |  |  | 25 |  |  |  | 1.0 |  |  |  | — |  |  |  | — |
Worthless stock deduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Difference in income tax rate on foreign earnings/other |  |  | 12 |  |  |  | 0.5 |  |  |  | 1 |  |  |  | 0.9 |
Change in valuation allowance |  |  | — |  |  |  | — |  |  |  | (3 | ) |  |  | (1.9 | )
|  | $ | 697 |  |  |  | 27.1 | % |  | $ | 29 |  |  |  | 18.8 | %
|  | Nine Months Ended September 30, 2024 |  |  | Nine Months Ended September 30, 2023 |
Income taxes computed at the federal statutory rate |  | $ | 861 |  |  |  | 21.0 | % |  | $ | (450 | ) |  |  | (21.0 | )%
State income taxes, net of federal tax benefit |  |  | 101 |  |  |  | 2.5 |  |  |  | (74 | ) |  |  | (3.5 | )
Excess tax expense (benefit) from stock options/restricted shares |  |  | 156 |  |  |  | 3.8 |  |  |  | 40 |  |  |  | 1.9 |
Worthless stock deduction |  |  | (248 | ) |  |  | (6.1 | ) |  |  | — |  |  |  | — |
Difference in income tax rate on foreign earnings/other |  |  | 124 |  |  |  | 3.0 |  |  |  | 72 |  |  |  | 3.4 |
Change in valuation allowance |  |  | — |  |  |  | — |  |  |  | 54 |  |  |  | 2.5 |
|  | $ | 994 |  |  |  | 24.2 | % |  | $ | (358 | ) |  |  | (16.7 | )%
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. On September 30, 2024, our valuation allowance was comprised of net operating losses in Ireland and the United Kingdom and totaled $ 466,000 . During the quarter ended March 31, 2024, we secured a worthless stock deduction for our dissolved Singapore entity, which allowed us to recognize a current tax deduction during the 2024 period and, accordingly, we reversed $ 162,000 of our valuation allowance against outstan din g deferred tax assets. As of December 31, 2023, our valuation allowance balance totaled $ 628,000 .

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