Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

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

	YEARS ENDED DECEMBER 31,
	2023		2022		2021
Current tax expense:
Federal	$	16,530	$	17,535	$	15,617
State	5,998		6,400		5,765
Deferred tax expense	1,647		3,076		2,708
Total Income tax expense	$	24,175	$	27,011	$	24,090

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

	YEARS ENDED DECEMBER 31,
	2023		2022		2021
Federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of Federal tax effect	6.0		5.4		5.0
Non-deductible compensation and meals and entertainment	2.3		2.5		2.2
Tax credits	(0.8)		(1.2)		(2.2)
Tax benefit from restricted stock vesting	(0.8)		(1.0)		(2.6)
Other	0.7		(0.3)		0.9
Effective tax rate	28.4	%	26.4	%	24.3	%

The 2023 effective tax rate was unfavorably impacted by a lower Work Opportunity Tax Credit (“WOTC”), a lower tax benefit from the vesting of restricted stock and higher non-deductible expenses, as compared to 2022. The 2022 effective rate was unfavorably impacted by a lower WOTC and a lower tax benefit from the vesting of restricted stock as compared with 2021, which were partially offset by greater non-deductible compensation to certain executive officers pursuant to IRS Code Section 162(m).

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

	DECEMBER 31,
	2023		2022
Deferred tax assets:
Accounts receivable reserves	$	382	$	901
Accrued liabilities	1,345		2,855
Deferred compensation obligation	6,616		6,521
Stock-based compensation	1,475		902
Operating lease liabilities	4,071		5,411
Other	8		8
Deferred tax assets	13,897		16,598
Deferred tax liabilities:
Prepaid expenses	(367)		(359)
Fixed assets	(4,307)		(4,694)
Goodwill	(2,401)		(2,408)
ROU assets for operating leases	(3,684)		(4,397)
Partnership basis difference	—		46
Deferred tax liabilities	(10,759)		(11,812)
Valuation allowance	—		—
Total Deferred tax assets, net	$	3,138	$	4,786

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 temporary differences and projections of future taxable income) 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.

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 2020.