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Note 14 - Income Tax

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. 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:

		2018				2017
Combined statutory rate			26.5	%			26.5	%
Nondeductible expenses			2.5				2.1
Tax effect of flow through entities			(1.4	)			(1.1	)
Impact of changes in foreign exchange rates			0.2				0.5
Adjustments to tax liabilities for prior periods			0.2				0.9
Effect of changes in enacted US federal tax rate			-				7.5
Effect of changes in enacted tax rate in other jurisdictions			(0.7	)			-
Changes in liability for unrecognized tax benefits			(0.3	)			(0.4	)
Stock-based compensation			0.9				0.6
Foreign, state, and provincial tax rate differential			(0.2	)			2.6
Change in valuation allowance			(0.1	)			(0.9	)
Contingent acquisition consideration			1.2				1.0
Other			0.5				0.4
Effective income tax rate			29.3	%			39.7	%

Earnings before income tax by jurisdiction comprise the following:

		2018				2017
Canada		$	21,627			$	21,814
United States			40,097				33,597
Foreign			120,110				100,570
Total		$	181,834			$	155,981

Income tax expense (recovery) comprises the following:

		2018				2017
Current
Canada		$	5,134			$	4,031
United States			1,768				3,235
Foreign			40,221				36,310
			47,123				43,576
Deferred
Canada			1,689				3,185
United States			10,732				20,657
Foreign			(6,284	)			(5,511	)
			6,137				18,331
Total		$	53,260			$	61,907

The deferred income tax expense for the United States for the year ended

December 31, 2017

includes the tax effect of changes in the enacted US federal tax rate of

$11,678.

The significant components of deferred income tax are as follows:

		2018				2017
Loss carry-forwards and other credits		$	19,056			$	37,869
Expenses not currently deductible			31,508				34,265
Revenue not currently taxable			(8,416	)			(15,227	)
Stock-based compensation			157				525
Investments			10,628				11,290
Provision for doubtful accounts			4,871				4,221
Financing fees			(83	)			162
Net unrealized foreign exchange losses			126				(634	)
Depreciation and amortization			(42,257	)			(32,035	)
Less: valuation allowance			(8,945	)			(11,079	)
Net deferred income tax asset		$	6,645			$	29,357

As at

December 31, 2018,

the Company believes that it is more likely than

not

that the net deferred tax assets of

$6,645

will be realized based upon future income, 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 estimates of future earnings are reduced.

The Company has pre-tax NOL carry-forward balances as follows:

		Pre-tax loss carry forward								Pre-tax losses not recognized								Pre-tax losses recognized
		2018				2017				2018				2017				2018				2017
Canada		$	16,249			$	30,904			$	27			$	24			$	16,222			$	30,880
United States			1,315				47,720				921				915				394				46,805
Foreign			39,147				50,512				27,363				30,705				11,784				19,807

The Company has pre-tax capital loss carry-forwards as follows:

		Pre-tax loss carry forward								Pre-tax losses not recognized								Pre-tax losses recognized
		2018				2017				2018				2017				2018				2017
Canada		$	2,208			$	1,881			$	1,869			$	1,567			$	339			$	314
United States			1,698				1,671				1,698				1,671				-				-
Foreign			6,285				7,139				6,285				7,139				-				-

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

2028.

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

(

2017

-

nil

). Cumulative unremitted foreign earnings of international subsidiaries of the Company approximated

$89,461

as at

December 31, 2018 (

2017

-

$42,709

). 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:

		2018				2017
Balance, January 1		$	1,858			$	2,292
Gross increases for tax positions of prior periods			6				18
Amount recognized on acquisitions			289				-
Reduction for lapses in applicable statutes of limitations			(560	)			(628	)
Foreign currency translation			(133	)			176
Balance, December 31		$	1,460			$	1,858

Of the

$1,460

(

2017

-

$1,858

) in gross unrecognized tax benefits,

$1,460

(

2017

-

$1,858

) would affect the Company’s effective tax rate if recognized. For the year-ended

December 31, 2018,

additional interest and penalties of

$6

related to uncertain tax positions was accrued (

2017

-

$18

). The Company reversed

$173

of accrued interest and penalties related to positions lapsed in applicable statute of limitations in

2018

(

2017

-

$155

). As at

December 31, 2018,

the Company had accrued

$190

(

2017

-

$213

) for potential income tax related interest and penalties.

Within the next

twelve

months, the Company believes it is reasonably possible that

$130

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 US 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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- References

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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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI http://asc.fasb.org/topic&trid=2144680

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