XML 28 R16.htm IDEA: XBRL DOCUMENT

Note 10 - Income Tax

12 Months Ended

Dec. 31, 2020

	(10)	Income Tax

		The Company’s income tax provision for the years ended December 31, 2020, 2019 and 2018 consists of the following (in thousands):

	Years Ended December 31,
	2020			2019		2018
Current
Federal	$	2,223		$	2,920	$	1,772
State		555			184		439
		2,778			3,104		2,211
Deferred
Federal		(28	)		485		1,917
State		164			307		(36	)
		136			792		1,881

Total income tax provision	$	2,914		$	3,896	$	4,092

The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2020			2019
Deferred tax assets:
Reserves	$	351		$	362
Inventory capitalization		550			396
Compensation programs		802			578
Equity-based compensation		524			403
Lease liability		567			795
Intangible assets		-			73
State tax credits, net of federal impact		123			274
Gross deferred tax assets		2,917			2,881
Valuation allowance		(64	)		(136	)
Net deferred tax assets		2,853			2,745

Deferred tax liabilities:
Excess of book over tax basis of fixed assets		(4,527	)		(4,877	)
Goodwill		(2,795	)		(2,008	)
Right of use asset		(554	)		(781	)
Intangible assets		(34	)		-
Total deferred tax liabilities		(7,910	)		(7,666	)
Net long-term deferred tax liabilities	$	(5,057	)	$	(4,921	)

		The amounts recorded as deferred tax assets as of December 31, 2020 and 2019, represent the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. The Company has gross deferred tax assets of approximately $2.9 million at December 31, 2020, that it believes are more likely than not to be realized in the carryforward period. Management reviews the recoverability of deferred tax assets during each reporting period. The Company has provided a valuation allowance of approximately $64 thousand for deferred tax assets (net of federal tax benefit), primarily related to tax credits generated in its 2019 and 2018 Massachusetts state income tax return that are being carried forward to future periods. The Company is uncertain as to whether it will have sufficient future taxable income in Massachusetts to utilize the credits prior to their expiration date. The valuation allowance against the Company’s deferred tax assets may require adjustments in the future based on changes in the mix of temporary difference, changes in tax laws, and operating performance.

		The Company has approximately $156 thousand of tax credit carryforwards related to one state jurisdiction that expire between 2021 and 2034.

The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying the U.S. federal corporate rate of 21% to income before income tax expense as follows:

	Years Ended December 31,
	2020			2019			2018
Computed “expected” tax rate		21	%		21	%		21	%
Increase (decrease) in income taxes resulting from:
State taxes, net of federal tax benefit		4.2			1.8			2.8
Meals and entertainment		0.1			0.2			0.2
Tax credits		(7.2	)		(6.2	)		(1.9	)
Non-deductible ISO stock option expense		-			-			0.1
Unrecognized tax benefits		-			(0.7	)		-
Excess tax benefits on equity awards		(1.2	)		(0.7	)		(1.3	)
Excess compensation		0.8			0.6			0.8
Other		0.2			0.4			0.5
Change in valuation allowance		-			0.1			-
Effective tax rate		17.9	%		16.5	%		22.2	%

		The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been audited by any state for income taxes with the exception of returns filed in Michigan which have been audited through 2004, income tax returns filed in Massachusetts which have been audited through 2007, income tax returns filed in Florida which have been audited through 2019, income tax returns filed in New Jersey which have been audited through 2012, and income tax returns in Colorado which have been audited through 2017. Certain tax credits in Iowa are currently being audited for the year 2018. Federal and state tax returns for the years 2016 through 2019 remain open to examination by the IRS and various state jurisdictions.

		A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax positions is as follows (in thousands):

	December 31,
	2020		2019
Gross UTB balance at beginning of fiscal year	$	-	$	150
Reductions for tax positions of prior years		-		(150	)
Gross UTB balance at end of fiscal year	$	-	$	-

At December 31, 2018, all of the unrecognized tax benefits related to tax returns of a specific state jurisdiction that were under examination. In January, 2019 the Company came to an agreement with the state and in February, 2019 the Company received a check in the amount of $156,000 as settlement of the unrecognized tax benefits.

- 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 + Details