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Note 12 - Income Taxes
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

12.

INCOME TAXES

 

The Company does not measure income tax expense for interim periods using the annual effective tax rate (“AETR”) method, as its estimated taxable income for future periods is not determined on a legal entity basis. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years prior to 2021 and state examinations for years prior to 2018. For foreign subsidiaries, the Company is generally no longer subject to tax examinations for years prior to 2015 in Asia and 2017 in Europe.

 

Due to the expiration of the statutes of limitations for certain jurisdictions, it is reasonably possible that unrecognized tax benefits related to previously filed tax returns may materially change from the amounts recorded as liabilities for uncertain tax positions in the Company’s condensed consolidated financial statements as of September 30, 2025. The Company’s liabilities for uncertain tax positions totaled $17.7 million as of September 30, 2025, compared to $18.1 million as of December 31, 2024. Approximately $0.4 million of these liabilities are expected to be resolved within the next twelve months due to statute expirations. These amounts, if recognized, would reduce the Company’s effective tax rate.

 

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. For the nine months ended September 30, 2025 and 2024, the Company recognized $0.2 million in each period, in interest and penalties in the condensed consolidated statements of operations. As of September 30, 2025, the Company had accrued approximately $1.4 million for the payment of interest and penalties, compared to $1.2 million as of  December 31, 2024. These amounts are included in liability for uncertain tax positions in the condensed consolidated balance sheets.

 

On July 4, 2025, the United States Congress enacted The One Big Beautiful Bill Act (the “Act”) which includes several significant corporate provisions, including the restoration of 100% bonus depreciation; the immediate expensing of domestic research and experimentation expenditures; modifications to the Section 163(j) interest limitations; and updates to the rules for global intangible low-taxes income and foreign-derived intangible income.

 

Election to Expense Domestic Research and Experimentation Costs

 

In accordance with the requirements of Section 174 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), effective for the years beginning after December 31, 2021, taxpayers are required to capitalize and amortize domestic research and experimentation ("R&E") expenditures over a five-year period.  During the three months ended September 30, 2025, the Company elected, pursuant to provisions issued under the Act to expense over two years the prior year capitalization of domestic R&E.

 

As a result of this election, the Company recognized an accelerated deduction for previously capitalized R&E expenditures incurred in the prior year, resulting in a reduction in taxable income for the current period of approximately $8.5 million. The Company’s deferred tax assets reflect the impact of the election, and the Company believes it is more likely than not that its deferred tax assets will be realized, based on the Company’s forecasted taxable income.