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Note 15 - Income Tax | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
15. | Income tax
The following is a reconciliation stated as a percentage of pre-tax earnings of the Ontario, Canada combined statutory corporate income tax rate to the Company’s effective tax rate:
|  |  | 2017 |  |  |  | 2016 |
Combined statutory rate |  |  | 26.5 | % |  |  | 26.5 | %
Nondeductible expenses |  |  | 2.1 |  |  |  | 2.4 |
Tax effect of flow through entities |  |  | (1.1 | ) |  |  | (1.1 | )
Impact of changes in foreign exchange rates |  |  | 0.5 |  |  |  | - |
Adjustments to tax liabilities for prior periods |  |  | 0.9 |  |  |  | (0.4 | )
Effects of changes in enacted US federal tax rate |  |  | 8.6 |  |  |  | - |
Changes in liability for unrecognized tax benefits |  |  | (0.4 | ) |  |  | (0.6 | )
Stock-based compensation |  |  | 0.6 |  |  |  | 0.5 |
Foreign, state, and provincial tax rate differential |  |  | 2.5 |  |  |  | 4.4 |
Other taxes |  |  | 0.7 |  |  |  | 1.4 |
Change in valuation allowance |  |  | (0.9 | ) |  |  | 0.3 |
Outside basis difference in investments |  |  | 1.0 |  |  |  | 0.5 |
Other |  |  | (0.3 | ) |  |  | 0.4 |
Effective income tax rate |  |  | 40.7 | % |  |  | 34.3 | %
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States, establishing new tax laws that will affect 2018 and future years, including a reduction of the US federal corporate income tax rate from 35% to 21%. As a result of the enacted reduction in the federal corporate income tax rate, the Company’s net deferred income tax assets have been re-measured as of December 31, 2017. The re-measurement resulted in incremental income tax expense of $13,325 for the year ended December 31, 2017 and a corresponding reduction in net deferred income tax assets. Earnings before income tax by jurisdiction comprise the following:
|  |  | 2017 |  |  |  | 2016 |
Canada |  | $ | 21,567 |  |  | $ | 23,309 |
United States |  |  | 32,178 |  |  |  | 40,435 |
Foreign |  |  | 101,687 |  |  |  | 75,656 |
Total |  | $ | 155,432 |  |  | $ | 139,400 |
Income tax expense (recovery) comprises the following:
|  |  | 2017 |  |  |  | 2016 |
Current |  |  |  |  |  |  |  |
Canada |  | $ | 4,031 |  |  | $ | 5,091 |
United States |  |  | 3,235 |  |  |  | 2,090 |
Foreign |  |  | 36,310 |  |  |  | 30,650 |
|  |  | 43,576 |  |  |  | 37,831 |
Deferred |  |  |  |  |  |  |  |
Canada |  |  | 3,125 |  |  |  | 2,278 |
United States |  |  | 21,812 |  |  |  | 12,753 |
Foreign |  |  | (5,213 | ) |  |  | (5,033 | )
|  |  | 19,724 |  |  |  | 9,998 |
Total |  | $ | 63,300 |  |  | $ | 47,829 |
The significant components of deferred income tax are as follows:
|  |  | 2017 |  |  |  | 2016 |
Loss carry-forwards and other credits |  | $ | 37,869 |  |  | $ | 56,822 |
Expenses not currently deductible |  |  | 22,830 |  |  |  | 22,525 |
Stock-based compensation |  |  | 525 |  |  |  | 474 |
Investments |  |  | 11,956 |  |  |  | 17,303 |
Provision for doubtful accounts |  |  | 4,221 |  |  |  | 4,990 |
Financing fees |  |  | 162 |  |  |  | 376 |
Net unrealized foreign exchange losses |  |  | (634 | ) |  |  | (399 | )
Depreciation and amortization |  |  | (32,035 | ) |  |  | (21,713 | )
Less: valuation allowance |  |  | (11,079 | ) |  |  | (12,707 | )
Net deferred income tax asset |  | $ | 33,815 |  |  | $ | 67,671 |
As at December 31, 2017, the Company believes that it is ‘more likely than not’ that the net deferred tax assets of $33,815 will be realized based upon projected future earnings, consideration of net operating loss (“NOL”) limitations, earnings trends, and tax planning strategies. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if projections of future earnings are reduced. The Company has gross NOL carry-forward balances as follows:
|  | Gross loss carry forward |  | Gross losses not recognized |  | Net
|  |  | 2017 |  |  |  | 2016 |  |  |  | 2017 |  |  |  | 2016 |  |  |  | 2017 |  |  |  | 2016 |
Canada |  | $ | 30,904 |  |  | $ | 37,428 |  |  | $ | 24 |  |  | $ | 153 |  |  | $ | 30,880 |  |  | $ | 37,275 |
United States |  |  | 47,720 |  |  |  | 85,550 |  |  |  | 915 |  |  |  | 4,100 |  |  |  | 46,805 |  |  |  | 81,450 |
Foreign |  |  | 50,512 |  |  |  | 45,988 |  |  |  | 30,705 |  |  |  | 31,543 |  |  |  | 19,807 |  |  |  | 14,445 |
The Company has gross capital loss carry-forwards as follows:
|  | Gross loss carry forward |  | Gross losses not recognized |  | Net
|  |  | 2017 |  |  |  | 2016 |  |  |  | 2017 |  |  |  | 2016 |  |  |  | 2017 |  |  |  | 2016 |
Canada |  | $ | 1,881 |  |  | $ | 183 |  |  | $ | 1,567 |  |  | $ | 108 |  |  | $ | 314 |  |  | $ | 75 |
United States |  |  | 1,671 |  |  |  | 54 |  |  |  | 1,671 |  |  |  | - |  |  |  | - |  |  |  | 54 |
Foreign |  |  | 7,139 |  |  |  | 6,521 |  |  |  | 7,139 |  |  |  | 6,521 |  |  |  | - |  |  |  | - |
These amounts above are available to reduce future, federal, state, and provincial income taxes in their respective jurisdictions. NOL carry-forward balances attributable to Canada begin to expire in 2033. NOL carry-forward balances attributable to the United States begin to expire in 2031. Foreign NOL carry-forward balances begin to expire in 2019. The utilization of NOLs may be subject to certain limitations under federal, provincial, state or foreign tax laws. Cumulative unremitted foreign earnings of the US subsidiaries is nil ( 2016 - nil ). Cumulative unremitted foreign earnings of international subsidiaries of the Company approximated $42,709 as at December 31, 2017 ( 2016 - $21,886 ). The Company has not provided a deferred tax liability on the unremitted foreign earnings as it is management’s intent to permanently reinvest such earnings outside of Canada. In addition, any repatriation of such earnings would not be subject to significant Canadian or foreign taxes. A reconciliation of the beginning and ending amounts of the liability for unrecognized tax benefits is as follows:
|  |  | 2017 |  |  |  | 2016 |
Balance, January 1 |  | $ | 2,292 |  |  | $ | 2,519 |
Gross increases for tax positions of current period |  |  | - |  |  |  | 111 |
Gross increases for tax positions of prior periods |  |  | 18 |  |  |  | 41 |
Amount recognized on acquisitions |  |  | - |  |  |  | 613 |
Reduction for lapses in applicable statutes of limitations |  |  | (628 | ) |  |  | (1,031 | )
Foreign currency translation |  |  | 176 |  |  |  | 39 |
Balance, December 31 |  | $ | 1,858 |  |  | $ | 2,292 |
Of the $1,858 ( 2016 - $2,292 ) in gross unrecognized tax benefits, $1,858 ( 2016 - $2,292 ) would affect the Company’s effective tax rate if recognized. For the year-ended December 31, 2017, additional interest and penalties of $18 related to uncertain tax positions was accrued ( 2016 - $234 ). The Company reversed $155 of accrued interest and penalties related to positions lapsed in applicable statute of limitations in 2017 ( 2016 - $58 ). As at December 3, 2017, the Company had accrued $213 ( 2016 - $350 ) for potential income tax related interest and penalties. Within the next twelve months, the Company believes it is reasonably possible that $550 of unrecognized tax benefits associated with uncertain tax positions may be reduced due to lapses in statutes of limitations. The Company files tax returns in Canada, United States and multiple foreign jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. Generally, income tax returns filed with the Canada Revenue Agency and related provinces are open for four to seven years and income tax returns filed with the United States Internal Revenue Service and related states are open for three to five years. Tax returns in the significant foreign jurisdictions that the company conducts business in are generally open for four years. The Company does not currently expect any other material impact on earnings to result from the resolution of matters related to open taxation years, other than noted above. Actual settlements may differ from the amounts accrued. The Company has, as part of its analysis, made its current estimates based on facts and circumstances known to date and cannot predict changes in facts and circumstances that may affect its current estimates.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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