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Note 11 - Income Tax | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
(11) | Income Tax
The Company’s domestic and foreign net income before provision for income taxes for the years ended December 31, 2023, 2022, and 2021 consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 26,545 |  |  | $ | 34,654 |  |  | $ | 21,205 |
Foreign |  |  | 27,357 |  |  |  | 18,064 |  |  |  | - |
Total |  | $ | 53,902 |  |  | $ | 52,718 |  |  | $ | 21,205 |
The Company’s income tax provision for the years ended December 31, 2023, 2022, and 2021 consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 6,099 |  |  | $ | 11,238 |  |  | $ | 5,793 |
State |  |  | 1,784 |  |  |  | 2,309 |  |  |  | 1,320 |
Foreign |  |  | 272 |  |  |  | 1,863 |  |  |  | - |
Total Current |  |  | 8,155 |  |  |  | 15,410 |  |  |  | 7,113 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 841 |  |  |  | (3,856 | ) |  |  | (1,399 | )
State |  |  | 2 |  |  |  | (624 | ) |  |  | (395 | )
Foreign |  |  | (20 | ) |  |  | (1 | ) |  |  | - |
Total Deferred |  |  | 823 |  |  |  | (4,481 | ) |  |  | (1,794 | )
Total income tax provision |  | $ | 8,978 |  |  | $ | 10,929 |  |  | $ | 5,319 |
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, |
|  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |  |  |
Reserves |  | $ | 603 |  |  | $ | 450 |
Inventory capitalization |  |  | - |  |  |  | 305 |
Compensation programs |  |  | 2,040 |  |  |  | 2,120 |
Equity-based compensation |  |  | 685 |  |  |  | 690 |
Lease liability |  |  | 3,596 |  |  |  | 3,298 |
Intangible assets |  |  | 1,774 |  |  |  | 1,132 |
Deferred revenue |  |  | 963 |  |  |  | 1,115 |
Other |  |  | 21 |  |  |  | 362 |
Gross deferred tax assets |  |  | 9,682 |  |  |  | 9,472 |
Valuation allowance |  |  | - |  |  |  | - |
Net deferred tax assets |  |  | 9,682 |  |  |  | 9,472 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Excess of book over tax basis of fixed assets |  |  | (2,839 | ) |  |  | (2,782 | )
Goodwill |  |  | (3,095 | ) |  |  | (2,445 | )
Right of use asset |  |  | (3,481 | ) |  |  | (3,245 | )
Inventory capitalization |  |  | (88 | ) |  |  | - |
Total deferred tax liabilities |  |  | (9,503 | ) |  |  | (8,472 | )
Net long-term deferred tax assets (liabilities) |  | $ | 179 |  |  | $ | 1,000 |
The amounts recorded as deferred tax assets as of December 31, 2023 and 2022 represent the amount of tax benefits of existing deductible temporary differences that are more likely than not to be realized through the generation of sufficient future taxable income. The Company had gross deferred tax assets of approximately $9.7 million on December 31, 2023, that it believes are more likely than not to be realized. Management reviews the recoverability of deferred tax assets during each reporting period. The actual tax provision for the years presented differs from that derived from using a U.S federal statutory rate of 21% to income before income tax expense as follows:
|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal tax benefit |  |  | 2.7 |  |  |  | 3.2 |  |  |  | 4.0 |
Tax credits |  |  | (0.1 | ) |  |  | (0.7 | ) |  |  | (1.7 | )
Return to provision adjustments |  |  | (3.2 | ) |  |  | - |  |  |  | 0.7 |
Foreign rate differential |  |  | (9.3 | ) |  |  | (3.7 | ) |  |  | - |
GILTI impact |  |  | 4.5 |  |  |  | 0.8 |  |  |  | - |
FDII impact |  |  | (0.7 | ) |  |  | - |  |  |  | - |
Excess tax benefits on equity awards |  |  | (1.9 | ) |  |  | (0.6 | ) |  |  | (0.2 | )
162m limitations |  |  | 1.9 |  |  |  | 0.8 |  |  |  | 0.7 |
Increases in uncertain tax positions |  |  | 1.3 |  |  |  | - |  |  |  | - |
Other |  |  | 0.5 |  |  |  | (0.1 | ) |  |  | 0.8 |
Change in valuation allowance |  |  | - |  |  |  | - |  |  |  | (0.2 | )
Effective tax rate |  |  | 16.7 | % |  |  | 20.7 | % |  |  | 25.1 | %
The Company’s foreign subsidiary earnings are subject to current U.S. taxation under the Tax Cuts and Jobs Act of 2017, which also repealed U.S. taxation on the subsequent repatriation of those earnings. The Company intends to repatriate substantially all of its future foreign subsidiary earnings. The repatriation of earnings outside of the U.S. generally does not represent a material net tax impact to the Company. The withholding taxes associated with the Company’s earnings in the Dominican Republic are generally fully creditable against the Company US tax liability and therefore do not produce any incremental tax consequences. The earnings of the Company’s other foreign subsidiaries, and therefore the withholding taxes associated with those earnings, are not material as of December 31, 2023. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, as well as in Ireland and Costa Rica. It currently does not have a local filing obligation with respect to its subsidiary in the Dominican Republic. 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 and is currently undergoing an audit for the years 2020 and 2021, 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, income tax returns in Colorado which have been audited through 2017, income tax returns in Iowa which have been audited through 2019, and income tax returns in Illinois which is currently undergoing an audit for the years 2020 and 2021. The Company’s federal tax return is currently being audited for the years 2019 and 2020. Federal and state tax returns for the years 2019 through 2022 remain open to examination by the IRS and various state jurisdictions. The Company’s non-US tax returns in Ireland and Costa Rica remain open for the years 2019 through 2022. The Company applies the accounting guidance in ASC 740 to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions, is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The following is a roll forward of the Company’s unrecognized tax benefits (“UTB”) (in thousands):
|  | December 31, |
|  | 2023 |  |  | 2022 |
Gross UTB balance at beginning of fiscal year |  | $ | - |  |  | $ | - |
Gross increases - tax positions of prior years |  |  | 670 |  |  |  | - |
Gross UTB balance at end of fiscal year |  | $ | 670 |  |  | $ | - |
As a result of an ongoing IRS audit, the Company, for the year ended December 31, 2023, recorded an uncertain tax benefit of $670 thousand related to disputed research credits taken in prior year’s federal tax returns. The Company did not have any uncertain tax benefits as of December 31, 2022.

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