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Note 7 - Income Taxes | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 7. Income taxes The components of income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Current tax: |  |  |  |  |  |  |  |  |  |  |  |
Netherlands (2020: U.K.) |  | $ | 283 |  |  | $ | 216 |  |  | $ | (707 | )
Foreign |  |  | 42,308 |  |  |  | 16,777 |  |  |  | 17,883 |
Total current tax |  |  | 42,591 |  |  |  | 16,993 |  |  |  | 17,176 |
Deferred tax: |  |  |  |  |  |  |  |  |  |  |  |
Netherlands (2020: U.K.) |  |  | - |  |  |  | - |  |  |  | - |
Foreign |  |  | (1,344 | ) |  |  | (726 | ) |  |  | (20,576 | )
Total deferred tax |  |  | (1,344 | ) |  |  | (726 | ) |  |  | (20,576 | )
Income tax expense (benefit) |  | $ | 41,247 |  |  | $ | 16,267 |  |  | $ | (3,400 | )
Following the closing of the Merger on October 1, 2021, the tax domicile of the Company changed from the U.K. to the Netherlands. As a result of this change in domicile due to the Merger, income tax expense (benefit) is split between the Netherlands and foreign tax jurisdictions for the year ended December 31, 2022 and 2021 and between the U.K. and foreign tax jurisdictions for the year ended December 31, 2020. The Netherland, U.K. and foreign components of income (loss) from continuing operations before income taxes and equity in income of joint ventures for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Netherlands (2020: U.K.) |  | $ | (13,984 | ) |  | $ | (19,190 | ) |  | $ | 22,819 |
Foreign |  |  | 19,355 |  |  |  | (113,181 | ) |  |  | (346,853 | )
Total |  | $ | 5,371 |  |  | $ | (132,371 | ) |  | $ | (324,034 | )
A reconciliation of the differences between the income tax provision computed at the Netherlands statutory rate of 25.8% and 25.0% for the year ended December 31, 2022 and 2021, respectively, and the U.K. statutory rate of 19.0% for the years ended December 31, 2020 to income (loss) from continuing operations before taxes and equity in joint ventures for the reasons below (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Statutory tax rate |  |  | 25.8 | % |  |  | 25.0 | % |  |  | 19.0 | %
Income tax expense (benefit) at statutory rate |  | $ | 1,387 |  |  | $ | (33,093 | ) |  | $ | (61,566 | )
Permanent differences |  |  | 12,187 |  |  |  | 14,123 |  |  |  | 120,239 |
Effect of overseas tax rates |  |  | (4,024 | ) |  |  | 9,905 |  |  |  | (1,754 | )
Net tax charge related to attributes with full valuation allowance |  |  | 28,267 |  |  |  | 28,607 |  |  |  | (71,259 | )
Exempt dividends from joint ventures |  |  | (2,649 | ) |  |  | (1,014 | ) |  |  | 14 |
Return to provision adjustments |  |  | (5,966 | ) |  |  | (5,001 | ) |  |  | 6,150 |
Withholding taxes |  |  | 3,029 |  |  |  | 1,995 |  |  |  | 984 |
Foreign exchange movements on tax balances |  |  | 694 |  |  |  | 67 |  |  |  | 1,216 |
Movement in uncertain tax positions |  |  | 8,322 |  |  |  | 678 |  |  |  | 2,576 |
Income tax expense (benefit) |  | $ | 41,247 |  |  | $ | 16,267 |  |  | $ | (3,400 | )
Effective tax rate |  |  | 768.0 | % |  |  | -12.3 | % |  |  | 1.0 | %
Deferred tax assets and liabilities are recorded for the anticipated future tax effects of temporary differences between the financial statement basis and tax basis of our assets and liabilities and are measured using the tax rates and laws expected to be in effect when the differences are projected to reverse. The primary components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows (in thousands):
|  | December 31, |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carry forwards |  | $ | 771,963 |  |  | $ | 731,315 |
Employee compensation and benefits |  |  | 9,977 |  |  |  | 12,958 |
Depreciation |  |  | 66,300 |  |  |  | 44,253 |
Other |  |  | 44,133 |  |  |  | 34,734 |
Investment in partnership |  |  | - |  |  |  | 51,890 |
Intangibles |  |  | 16,197 |  |  |  | 22,980 |
Valuation allowance |  |  | (881,286 | ) |  |  | (829,087 | )
Total deferred tax assets |  |  | 27,284 |  |  |  | 69,043 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (13,630 | ) |  |  | (1,935 | )
Goodwill and other intangibles |  |  | (36,968 | ) |  |  | (42,784 | )
Investment in partnership |  |  | (911 | ) |  |  | (48,856 | )
Other |  |  | (6,194 | ) |  |  | (7,212 | )
Total deferred tax liabilities |  |  | (57,703 | ) |  |  | (100,787 | )
Net deferred tax liabilities |  | $ | (30,419 | ) |  | $ | (31,744 | )
We recognize a valuation allowance where it is more likely than not that some or all of the deferred tax assets will not be realized. The realization of a deferred tax asset is dependent upon the ability to generate sufficient taxable income in the appropriate taxing jurisdictions where the deferred tax assets are initially recognized. The changes in valuation allowances were as follows (in thousands):
|  | Year Ended December 31 |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Balance at the beginning of the period |  | $ | 829,087 |  |  | $ | 512,711 |  |  | $ | 443,398 |
Additions attributable to the Merger |  |  | - |  |  |  | 187,319 |  |  |  | - |
Additions not attributable to the Merger |  |  | 146,451 |  |  |  | 160,299 |  |  |  | 72,025 |
Reductions |  |  | (94,252 | ) |  |  | (31,242 | ) |  |  | (2,712 | )
Balance at end of period |  | $ | 881,286 |  |  | $ | 829,087 |  |  | $ | 512,711 |
As of December 31, 2022, the Company had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $628.7 million, net of existing Section 382 (as defined below) limitations, $160.6 million, of which were incurred prior to January 1, 2018 (and will begin to expire, if unused, in 2036) and $468.1 million of which were incurred on or after January 1, 2018 (and will not expire and will be carried forward indefinitely). Section 382 of the Code (“Section 382”) imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the fair market value of such corporation’s stock at the time of the ownership change by (ii) a percentage approximately equivalent to the yield on long-term tax-exempt bonds during the month in which the ownership change occurs. Any unused annual limitation may be carried over to later years. The Company underwent an ownership change under Section 382 as a result of the Merger, which will trigger a limitation (calculated as described above) on the combined company’s ability to utilize any historic Frank’s NOLs and will cause some of the Frank’s NOLs incurred prior to January 1, 2018 to expire before the combined company will be able to utilize them to reduce taxable income in future periods. The exchange of ordinary shares of Legacy Expro for shares of the Company's common stock (“Company Common Stock”) in the Merger was, standing alone, insufficient to result in an ownership change with respect to Legacy Expro. However, the Company will undergo an ownership change as a result of the Merger taking into account other changes in ownership of Company stock occurring within the relevant three-year period described above. Due to the ownership change with respect to Legacy Expro as a result of the Merger, the combined company will be prevented from fully utilizing Legacy Expro’s historic NOLs incurred prior to January 1, 2018 prior to their expiration. We have performed an analysis of uncertain tax positions in the various jurisdictions in which we operate and concluded that we are adequately provided. Our tax filings are subject to regular audits by tax authorities in the various jurisdictions in which we operate. Tax liabilities are based on estimates, however due to the uncertain and complex application of tax legislation, the ultimate resolution of audits may be materially different to our estimates. The Company is subject to income taxation in many jurisdictions around the world. The following table presents the changes in our uncertain tax positions as of December 31, 2022 and 2021 (in thousands):
|  | Year ended December 31 |
|  | 2022 |  |  | 2021 |
Balance at the beginning of the period |  | $ | 76,114 |  |  | $ | 35,377 |
Additions attributable to the Merger |  |  | 7,259 |  |  |  | 40,144 |
Additions based on tax positions related to current period not attributable to the Merger |  |  | 8,009 |  |  |  | 5,774 |
Additions for tax positions of prior year period not attributable to the Merger |  |  | 2,371 |  |  |  | 5,094 |
Settlements with tax authorities |  |  | (2,490 | ) |  |  | (2,370 | )
Reductions for tax positions of prior years |  |  | (547 | ) |  |  | (5,138 | )
Reductions due to the lapse of statute of limitations |  |  | (1,525 | ) |  |  | (2,094 | )
Effect of changes in foreign exchange rates |  |  | (1,054 | ) |  |  | (673 | )
Balance at the end of the period |  | $ | 88,137 |  |  | $ | 76,114 |
The amounts above include penalties and interest of $9.8 million and $4.2 million for the years ended December 31, 2022 and 2021, respectively. We classify penalties and interest relating to uncertain tax positions within income tax (expense) benefit in the consolidated statements of operations. Approximately $58.0 million and $46.0 million of unrecognized tax benefits as of December 31, 2022 and December 31, 2021 respectively, included in “Other non-current liabilities” on the consolidated balance sheet, would positively impact our future rate and be recognized as additional tax benefit in our statement of operations if resolved in our favor. Approximately $30.1 million of unrecognized tax benefits as of December 31, 2022 and at December 31, 2021 relate to certain deductions and should not impact our future rate. We do not foresee material resolution of these positions in the coming 12 months. We file income tax returns in the Netherlands and in various other foreign jurisdictions in respect of the Company’s subsidiaries. In all cases we are no longer subject to income tax examination by tax authorities for years prior to 2008. Tax filings of our subsidiaries, branches and related entities are routinely examined in the normal course of business by the relevant tax authorities. We believe that there are no jurisdictions in which the outcome of unresolved issues is likely to be material to our results of operations, financial position or cash flows.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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