Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Current:
Federal	$	28,928		$	31,617		$	36,045
State and local		7,686			5,928			3,848
Foreign		13,234			8,862			7,234
Total current provision		49,848			46,407			47,127
Deferred:
Federal		2,579			(1,416	)		6,171
State and local		403			(272	)		661
Foreign		(308	)		515			(280	)
Total deferred provision		2,674			(1,173	)		6,552
Provision for income taxes	$	52,522		$	45,234		$	53,679

Pre-tax income from U.S. operations was $190.4 million, $168.5 million and $165.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. Pre-tax income from foreign operations was $67.0 million, $49.6 million and $36.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

On December 22, 2017, the Tax Cut and Jobs Act (“Tax Act”) was enacted into law. The Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system and imposing a repatriation tax on deemed earnings of foreign subsidiaries. The Company recorded a provisional tax charge in 2017 of $11.7 million, composed of $6.7 million to re-measure U.S. deferred tax assets and $5.0 million for the repatriation tax on accumulated undistributed foreign earnings. In 2018, the Company reduced the provisional tax charge by $0.4 million as a result of new regulatory guidance and changes in interpretations and assumptions made by the Company.

The difference between the Company’s reported provision for income taxes and the U.S. federal statutory rate of 21% is as follows:

	Year Ended December 31,
	2019				2018				2017
U.S. federal tax at statutory rate		21.0		%		21.0		%		35.0		%
State and local taxes - net of federal benefit		2.5				2.0				1.5
Credits and deductions related to research activities		(0.3	)			(0.3	)			(1.2	)
Foreign rate differential benefit		(0.5	)			(0.5	)			(2.9	)
Excess tax benefit from stock-based compensation		(3.5	)			(2.1	)			(11.6	)
Tax Cuts and Jobs Act provisional tax charge		—				(0.2	)			5.8
Other, net		1.2				0.8				—
Provision for income taxes		20.4		%		20.7		%		26.6		%

The following is a summary of the Company’s net deferred tax assets:

	As of December 31,
	2019			2018
	(In thousands)
Deferred tax assets:
Stock compensation expense	$	4,926		$	4,967
Operating lease liabilities		20,227			—
Other		892			3,569
Total deferred tax assets		26,045			8,536
Valuation allowance		—			—
Net deferred tax assets		26,045			8,536
Deferred tax liabilities:
Depreciation and amortization		(4,085	)		(1,847	)
Capitalized software development costs		(5,306	)		(3,776	)
Goodwill and intangible assets		(1,120	)		(898	)
Operating lease right-of-use assets		(16,515	)		—
Deferred tax (liability) asset, net	$	(981	)	$	2,015

A summary of the changes in the valuation allowance is as follows:

	Year Ended December 31,
	2019		2018			2017
	(In thousands)
Valuation allowance at beginning of year	$	—	$	4,648		$	7,235
(Decrease) to valuation allowance attributable to:
Expiration of capital loss carryforwards		—		(4,648	)		—
Federal and state tax rate changes		—		—			(2,587	)
Valuation allowance at end of year	$	—	$	—		$	4,648

The Company and certain of its subsidiaries file U.S. federal, state and foreign income tax returns. The Company is currently under a New York State income tax examination for tax years 2010 through 2017. At this time, the Company cannot estimate when the examinations will conclude or the impact such examinations will have on the Company’s Consolidated Financial Statements, if any. Generally, the Company is no longer subject to tax examinations by tax authorities for years prior to 2016.

A reconciliation of the unrecognized tax benefits is as follows:

	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Balance at beginning of year	$	4,718	$	2,650	$	29
Additions attributable to state and local apportionment		2,113		2,068		2,650
Reductions for tax positions of prior years		—		—		(29	)
Balance at end of year	$	6,831	$	4,718	$	2,650

As of December 31, 2019, the Company recorded $6.8 million of unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate. Due to the uncertainty related to the timing and potential outcome of audits, the Company cannot reasonably estimate the amount of the unrecognized tax benefit that could be adjusted in the next 12 months. During the years ended December 31, 2019, 2018 and 2017, the Company recognized $0.6 million, $0.4 million and $0.2 million, respectively, in penalties and interest. The Company had $1.2 million and $0.6 million accrued for the payment of interest and penalties at December 31, 2019 and 2018, respectively.