Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.1
Income Taxes
 12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

We are subject to U.S. federal income tax as well as income tax in multiple state and local jurisdictions. We have concluded all U.S. federal income tax matters as well as material state and local tax matters for years through 2015.

The Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act significantly affects the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%. In connection with the permanent reduction in the U.S. statutory corporate tax rate, we recalculated our net deferred tax liabilities as of December 31, 2017 and recorded a provisional tax benefit of approximately $10.6 million in 2017.

We applied the guidance in Staff Accounting Bulletin 118 when accounting for the enactment-date effects of the Tax Act in 2017 and throughout 2018. At December 31, 2017, we had substantially completed our provisional analysis of the income tax effects of the Tax Act and recorded a reasonable estimate in 2017 of such effects. During 2018, we refined our calculations, evaluated changes in interpretations and assumptions that we had made, applied additional guidance issued by the U.S. Government, and evaluated actions and related accounting policy decisions we have made. As of December 22, 2018, we completed our accounting for all of the enactment-date income tax effects of the Tax Act and identified an additional tax benefit of approximately $795 thousand to the provisional one-time charge for the year ended December 31, 2017, related to the Tax Act.


We file consolidated federal income tax returns that include all of our subsidiaries. The components of the provision for income taxes from continuing operations for the years ended December 31, 2019, 2018 and 2017 are as follows (in thousands):
 
2019
 
2018
 
2017
Current
 
 
 
 
 
Federal
$
7,739

 
$
9,667

 
$
14,149

State
1,344

 
1,758

 
2,511

Foreign
825

 
140

 
—

 
9,908

 
11,565

 
16,660

Deferred
 

 
 

 
 

Federal
(66
)
 
(1,114
)
 
(10,645
)
State
(490
)
 
(347
)
 
110

Foreign
51

 
64

 
(136
)
 
(505
)
 
(1,397
)
 
(10,671
)
Provision for income taxes
$
9,403

 
$
10,168

 
$
5,989



The differences between the amount of tax computed at the federal statutory rate of 21% in 2019 and 2018, and 35% in 2017, and the provision for income taxes from continuing operations for the years ended December 31, 2019, 2018 and 2017 are as follows (in thousands):
 
2019
 
2018
 
2017
Tax at statutory federal income tax rate
$
9,749

 
$
9,502

 
$
15,780

Increases (decreases) in tax resulting from:
 

 
 

 
 

State taxes, net of federal tax benefit
1,805

 
1,861

 
1,732

Permanent differences, net
(195
)
 
367

 
(275
)
Impact of Tax Act
—

 
(795
)
 
(10,556
)
Tax credits
(612
)
 
(375
)
 
(368
)
Prior year true-up adjustment
(1,274
)
 
(113
)
 
(346
)
Other provision adjustments
(70
)
 
(279
)
 
22

Provision for income taxes
$
9,403

 
$
10,168

 
$
5,989


Certain amounts from the prior years have been reclassified to conform to the current year presentation.
The tax effect of temporary differences representing deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows (in thousands):
 
2019
 
2018
Gross deferred tax assets
 
 
 
Deferred compensation and accrued paid leave
$
7,498

 
$
5,794

Accrued expenses
303

 
1,310

Stock-based compensation
678

 
819

Interest rate swaps
367

 
—

Reserve for contract disallowances
145

 
120

Acquisition-related expenses
—

 
151

Capitalized inventory
—

 
742

State operating loss carryforward
24

 
24

Tax credit carryforward
1,547

 
47

Foreign country operating loss carryforward
—

 
157

 
10,562

 
9,164

Valuation allowance (a)
(1,165
)
 
(107
)
  Total gross deferred tax assets
9,397

 
9,057

 
 
 
 
Gross deferred tax liabilities
 
 
 
Interest rate swaps
—

 
(49
)
Depreciation
(1,877
)
 
(1,739
)
Deferred revenues
(1,681
)
 
(2,164
)
Goodwill and intangible assets
(23,383
)
 
(23,395
)
Prepaid expenses
(60
)
 
(120
)
Capitalized inventory
(240
)
 
—

Total gross deferred tax liabilities
(27,241
)
 
(27,467
)
Net deferred tax liabilities
$
(17,844
)
 
$
(18,410
)


(a) A valuation allowance was provided against certain state tax credit and foreign tax loss deferred tax assets arising from carryforwards of unused tax benefits.