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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE M – Income Taxes Our provisions for income taxes included current federal, foreign and state income tax expense, as well as deferred tax expense as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | (184 | ) |  | $ | 3,684 |
State |  |  | 1,103 |  |  |  | 258 |  |  |  | 555 |
Foreign |  |  | 540 |  |  |  | 652 |  |  |  | 599 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 3,011 |  |  |  | 10,262 |  |  |  | (1,337 | )
State |  |  | 224 |  |  |  | (291 | ) |  |  | (169 | )
Foreign |  |  | (410 | ) |  |  | (355 | ) |  |  | (577 | )
|  | $ | 4,468 |  |  | $ | 10,342 |  |  | $ | 2,755 |
The tax provision for the year ended December 31, 2017 includes a $0.4 million reclass of alternative minimum tax (“AMT”) credit carryforwards from the deferred federal provision to current federal provision. These unutilized AMT credit carryforwards become partially refundable in 2019, 2020 and 2021 and fully refundable in 2022. A reconciliation of the expected federal income tax at the statutory rate to the provision for income taxes was as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Expected federal income tax at statutory rate |  | $ | 5,951 |  |  | $ | 3,635 |  |  | $ | 2,662 |
State income taxes, net of federal tax effect |  |  | 1,293 |  |  |  | 417 |  |  |  | 284 |
Tax impact of foreign activity |  |  | 57 |  |  |  | (105 | ) |  |  | (115 | )
Nondeductible executive compensation |  |  | 902 |  |  |  | 530 |  |  |  | 159 |
Nondeductible expenses |  |  | 351 |  |  |  | 268 |  |  |  | 213 |
Change in valuation allowance |  |  | (4 | ) |  |  | 16 |  |  |  | (35 | )
Change in state deferred rate |  |  | 38 |  |  |  | (134 | ) |  |  | (67 | )
Research and development credit |  |  | (1,843 | ) |  |  | (227 | ) |  |  | (261 | )
Tax impact of Tax Cuts and Jobs Act |  |  | — |  |  |  | 6,796 |  |  |  | — |
Tax impact of stock activity |  |  | (2,438 | ) |  |  | (925 | ) |  |  | — |
Other |  |  | 161 |  |  |  | 71 |  |  |  | (85 | )
Total provision for income taxes |  | $ | 4,468 |  |  | $ | 10,342 |  |  | $ | 2,755 |
The Tax Act, which was enacted on December 22, 2017, reduced the corporate federal income tax rate to 21.0% effective January 1, 2018, resulting in discrete tax expense of $6.8 million for the reduction of deferred tax assets. Also, the Tax Act expanded the deduction limits on executive compensation and included transition rules for previously awarded compensation. Differences between our effective tax rate and statutory tax rates are primarily due to the federal research and development credit partially offset by permanently non-deductible expense. Additionally, under ASU 2016-09, excess tax benefits generated upon settlement or exercise of stock awards are now recognized as a reduction to income tax expense as a discrete tax item in the period that the event occurs creating potentially significant fluctuation in tax expense by year. The significant components of our deferred tax assets (liabilities) were as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Deferred tax assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net operating loss and credit carryforwards |  | $ | 8,356 |  |  |  |  |  |  | $ | 11,067 |  |  |  |  |
Stock-based compensation expense |  |  | 3,647 |  |  |  |  |  |  |  | 4,273 |  |  |  |  |
Accounts receivable allowances |  |  | 464 |  |  |  |  |  |  |  | 307 |  |  |  |  |
Accrued expenses |  |  | 3,185 |  |  |  |  |  |  |  | 2,126 |  |  |  |  |
Other |  |  | 180 |  |  |  |  |  |  |  | 182 |  |  |  |  |
Gross deferred tax asset |  |  |  |  |  |  | 15,832 |  |  |  |  |  |  |  | 17,955 |
Less: valuation allowance |  |  | (797 | ) |  |  |  |  |  |  | (602 | ) |  |  |  |
Total net deferred tax asset |  |  |  |  |  |  | 15,035 |  |  |  |  |  |  |  | 17,353 |
Deferred tax liability |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred operations |  |  | (2,787 | ) |  |  |  |  |  |  | (3,850 | ) |  |  |  |
Foreign operations |  |  | (135 | ) |  |  |  |  |  |  | (133 | ) |  |  |  |
Depreciation and amortization |  |  | (2,943 | ) |  |  |  |  |  |  | (1,536 | ) |  |  |  |
Other |  |  | (90 | ) |  |  |  |  |  |  | (24 | ) |  |  |  |
Total deferred tax liability |  |  |  |  |  |  | (5,955 | ) |  |  |  |  |  |  | (5,543 | )
Net deferred tax assets |  |  |  |  |  | $ | 9,080 |  |  |  |  |  |  | $ | 11,810 |
As of December 31, 2018, we had net operating loss carryforwards of $37.5 million for U.S. federal tax purposes. We also had $4.1 million of various state net operating loss carryforwards. The loss carryforwards for federal tax purposes will expire between 2020 and 2038 if not utilized. The loss carryforwards for state tax purposes will expire between 2019 and 2031 if not utilized. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership. We have performed a Section 382 analysis and we believe that approximately $17.6 million of federal losses will expire unused due to Section 382 limitations. The maximum annual limitation of federal net operating losses under Section 382 is approximately $1.0 million. This limitation could be further restricted if any ownership changes occur in future years. Accordingly, our deferred tax assets are reported net of the Section 382 limitations. As of December 31, 2018 we had federal research and development credit carryforwards, net of Section 383 limitations, of $3.0 million, which, if not utilized, will begin to expire in 2030. We had state research and development credit carryforwards of $1.0 million which, if not utilized, will begin to expire in 2025. As of December 31, 2018, we had a valuation allowance against our deferred tax assets of $0.8 million. The valuation allowance is established for state credit carryforwards that we do not expect to utilize based on our current expectations of future state taxable income. We are subject to income taxes for U.S. federal and various state and international jurisdictions. We are generally subject to U.S. federal and state tax examinations for all prior tax years due to our net operating loss carryforwards and the utilization of the carryforwards in years still open under statute. As of December 31, 2018, we do not have any unrecognized tax benefits. It is our practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We do not expect any material changes in our unrecognized tax positions over the next 12 months.

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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 + Details
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