Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes from continuing operations consists of the following (in thousands):

	YEARS ENDED DECEMBER 31,
	2020		2019		2018
Current tax expense:
Federal	$	17,278	$	12,074	$	12,032
State	4,119		5,057		5,369
Deferred tax expense	(2,224)		(301)		(397)
Total Income tax expense	$	19,173	$	16,830	$	17,004

The provision for income taxes from continuing operations shown above varied from the statutory federal income tax rate for those periods as follows:

	YEARS ENDED DECEMBER 31,
	2020		2019		2018
Federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of Federal tax effect	5.3		5.8		6.1
Non-deductible compensation and meals and entertainment	1.4		1.6		1.7
Tax credits	(1.5)		(2.1)		(2.5)
Tax benefit from restricted stock vesting	(1.5)		(1.6)		(0.8)
Other	0.8		(1.1)		(0.4)
Effective tax rate	25.5	%	23.6	%	25.1	%

The 2020 effective tax rate was unfavorably impacted by a lower Work Opportunity Tax Credit in 2020 versus 2019, and the 2019 effective tax rate was favorably impacted primarily by a greater tax benefit from the vesting of restricted stock and a favorable tax adjustment related to our valuation allowance on the foreign tax credit.

Deferred tax assets and liabilities are composed of the following (in thousands):

	DECEMBER 31,
	2020		2019
Deferred tax assets:
Accounts receivable reserves	$	829	$	542
Accrued liabilities	1,657		1,161
Deferred compensation obligation	5,046		4,715
Stock-based compensation	618		739
Operating lease liabilities	5,223		5,497
Pension and post-retirement benefit plans	3,721		3,745
Deferred payroll taxes	4,978		—
Other	461		160
Deferred tax assets	22,533		16,559
Deferred tax liabilities:
Prepaid expenses	(489)		(459)
Fixed assets	(2,811)		(965)
Deferred payroll taxes	(2,370)		(1,889)
ROU assets for operating leases	(4,347)		(4,767)
Partnership basis difference	(1,469)		—
Other	(309)		(328)
Deferred tax liabilities	(11,795)		(8,408)
Valuation allowance	—		(114)
Total Deferred tax assets, net	$	10,738	$	8,037

In evaluating the realizability of Kforce’s deferred tax assets, management assesses whether it is more likely than not that some portion, or all, of the deferred tax assets, will be realized. Management considers, among other things, the ability to generate future taxable income (including reversals of deferred tax liabilities) during the periods in which the related temporary differences will become deductible. In 2019, management elected to treat foreign taxes paid as a deduction on our tax return and, accordingly, reversed the deferred tax asset and corresponding valuation allowance during the year ended December 31, 2019.

Kforce is periodically subject to IRS audits, as well as state and other local income tax audits for various tax years. Although Kforce has not experienced any material liabilities in the past due to income tax audits, Kforce can make no assurances concerning any future income tax audits.

Uncertain Income Tax Positions

The following table presents a reconciliation of the beginning and ending balance of unrecognized tax benefits for the years ended (in thousands):

	DECEMBER 31,
	2020		2019		2018
Unrecognized tax benefits, beginning	$	383	$	906	$	1,127
Additions for prior year tax positions	—		—		41
Additions for current year tax positions	—		—		—
Lapse of statute of limitations	(188)		(497)		(248)
Reductions for tax positions of prior years	(13)		—		(14)
Settlements	—		(26)		—
Unrecognized tax benefits, ending	$	182	$	383	$	906

As of December 31, 2020, the amount of unrecognized tax benefit that would impact the effective tax rate, if recognized, is $0.2 million. Kforce does not expect any significant changes to its uncertain tax positions in the next 12 months.

Kforce and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. With a few exceptions, Kforce is no longer subject to federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2017.