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Note 12 - Income Tax
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
(12)

Income Tax

 

The Company’s domestic and foreign net income before provision for income taxes for the years ended December 31, 2024, 2023, and 2022 consists of the following (in thousands):

 

   

Years Ended December 31,

  
   

2024

    

2023

    

2022

  
                         

Domestic

   $ 30,266     $ 26,545     $ 34,654  

Foreign

     42,759       27,357       18,064  

Total

   $ 73,025     $ 53,902     $ 52,718  

 

The Company’s income tax provision for the years ended December 31, 2024, 2023, and 2022 consists of the following (in thousands):

 

   

Years Ended December 31,

  
   

2024

    

2023

    

2022

  

Current

                        

Federal

   $ 6,841     $ 6,099     $ 11,238  

State

     2,471       1,784       2,309  

Foreign

     3,449       272       1,863  

Total Current

     12,761       8,155       15,410  

Deferred

                        

Federal

     1,044       841       (3,856 )

State

     230       2       (624 )

Foreign

     9       (20 )     (1 )

Total Deferred

     1,283       823       (4,481 )

Total income tax provision

   $ 14,044     $ 8,978     $ 10,929  

 

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,

  
   

2024

    

2023

  

Deferred tax assets:

                

Accruals

   $ 753     $ 603  

Tax credits

     183       -  

Compensation programs

     2,202       2,040  

Equity-based compensation

     928       685  

Lease liability

     4,306       3,596  

Intangible assets

     2,558       1,774  

Deferred revenue

     705       963  

Other

     12       21  

Gross deferred tax assets

     11,647       9,682  

Valuation allowance

     -       -  

Net deferred tax assets

     11,647       9,682  
                 

Deferred tax liabilities:

                

Excess of book over tax basis of fixed assets

   $ (2,846 )   $ (2,839 )

Goodwill

     (4,975 )     (3,095 )

Right of use asset

     (4,175 )     (3,481 )

Intangible assets

     (2,882 )     -  

Inventory capitalization

     (65 )     (88 )

Total deferred tax liabilities

     (14,943 )     (9,503 )

Net long-term deferred tax assets (liabilities)

   $ (3,296 )   $ 179  

 

The amounts recorded as deferred tax assets as of December 31, 2024 and 2023 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 $11.6 million on December 31, 2024, 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,

  
   

2024

    

2023

    

2022

  

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

     3.0       2.7       3.2  

Tax credits

     (0.3 )     (0.1 )     (0.7 )

Return to provision adjustments

     0.3       (3.2 )     -  

Foreign rate differential

     (7.7 )     (9.3 )     (3.7 )

GILTI impact

     1.6       4.5       0.8  

FDII impact

     (0.5 )     (0.7 )     -  

Excess tax benefits on equity awards

     (1.8 )     (1.9 )     (0.6 )

162m limitations

     2.7       1.9       0.8  

Other

     0.9       1.8       (0.1 )

Effective tax rate

     19.2 %     16.7 %     20.7 %

 

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 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 for the year ended December 31, 2024.

 

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 subsidiaries in the Dominican Republic.  The Company has been audited by the following states: income tax returns filed in Michigan which have been audited through 2004, income tax returns filed in Massachusetts which have been audited through 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 have been audited through 2021. Federal and state tax returns for the years 2021 through 2023 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 2020 through 2023.

 

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,

  
   

2024

    

2023

  

Gross UTB balance at beginning of fiscal year

   $ 670     $ -  

Gross increases - tax positions of prior years

     106       670  

Settlement of tax positions

     (776 )     -  

Gross UTB balance at end of fiscal year

   $ -     $ 670  

 

 

As of December 31, 2024, the Company had recorded zero unrecognized tax benefits. The Company closed audits with the IRS and the state of Massachusetts during the year and reduced previously recorded uncertain tax benefits to zero as a result of closing those audits. For the year ended December 31, 2023, the Company recorded an uncertain tax benefit of $670 thousand related to disputed research credits taken in prior year’s federal tax returns. The audit was completed and closed in 2024 and, accordingly the amount was paid, and the liability was satisfied. The Company’s policy is to record interest and penalties on uncertain tax benefits in income tax expense.