Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

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

	YEARS ENDED DECEMBER 31,
	2021		2020		2019
Current tax expense:
Federal	$	15,617	$	17,278	$	12,074
State	5,765		4,119		5,057
Deferred tax expense	2,708		(2,224)		(301)
Total Income tax expense	$	24,090	$	19,173	$	16,830

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,
	2021		2020		2019
Federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of Federal tax effect	5.0		5.3		5.8
Non-deductible compensation and meals and entertainment	2.2		1.4		1.6
Tax credits	(2.2)		(1.5)		(2.1)
Tax benefit from restricted stock vesting	(2.6)		(1.5)		(1.6)
Other	0.9		0.8		(1.1)
Effective tax rate	24.3	%	25.5	%	23.6	%

The 2021 effective rate was favorably impacted by a higher Work Opportunity Tax Credit (WOTC) and a greater tax benefit from the vesting of restricted stock in 2021 versus 2020. These were offset by greater non-deductible compensation to certain executive officers pursuant to IRS Code Section 162(m). The 2020 effective tax rate was unfavorably impacted by a lower WOTC in 2020 versus 2019. The 2019 effective tax rate was favorably impacted primarily by 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,
	2021		2020
Deferred tax assets:
Accounts receivable reserves	$	604	$	829
Accrued liabilities	2,367		1,657
Deferred compensation obligation	5,702		5,046
Stock-based compensation	715		618
Operating lease liabilities	4,704		5,223
Pension and post-retirement benefit plans	2,929		3,721
Deferred payroll taxes	4,965		4,978
Other	11		461
Deferred tax assets	21,997		22,533
Deferred tax liabilities:
Prepaid expenses	(604)		(489)
Fixed assets	(4,185)		(2,811)
Goodwill and intangible assets	(2,413)		(2,370)
ROU assets for operating leases	(3,965)		(4,347)
Partnership basis difference	(2,966)		(1,469)
Other	(207)		(309)
Deferred tax liabilities	(14,340)		(11,795)
Valuation allowance	—		—
Total Deferred tax assets, net	$	7,657	$	10,738

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.

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,
	2021		2020		2019
Unrecognized tax benefits, beginning	$	182	$	383	$	906
Lapse of statute of limitations	(159)		(188)		(497)
Reductions for tax positions of prior years	—		(13)		—
Settlements	—		—		(26)
Unrecognized tax benefits, ending	$	23	$	182	$	383

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 2018.