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Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 8 — INCOME TAXES 

 

The Company provides for income taxes based on the Federal and state statutory rates on taxable income. U.S. and foreign components of income before incomes taxes are presented below:

 

  

For the years ended December 31,

 

(In thousands)

 

2024

  

2023

  

2022

 

Domestic

 $7,093  $(11,630) $(21,403)

Foreign

  (32,184)  (26,100)  (80,681)

Total

 $(25,091) $(37,730) $(102,084)

 

The income tax expense (benefit) is comprised of the following:

 

  

For the years ended December 31,

 

(In thousands)

 

2024

  

2023

  

2022

 

Current

            

Federal

 $316  $-  $- 

State

  52   218   244 

Foreign — Other

  984   209   392 

Total current

  1,352   427   636 

Deferred

            

Federal

  842   1,492   5,709 

State

  298   625   218 

Foreign — Other

  612   602   (487)

Total deferred

  1,752   2,719   5,440 

Income tax expense

 $3,104  $3,146  $6,076 

 

A reconciliation of the U.S. federal statutory income tax (benefit) expense to the Company’s effective income tax provision is as follows:

 

  

For the years ended December 31,

 
  

2024

  

2023

  

2022

 

Tax provision at statutory rate – federal

  21.0%  21.0%  21.0%

Tax provision at effective state and local rates

  (1.4%)  (2.1%)  (0.3%)

Foreign tax rate differential

  (32.7%)  (17.1%)  (16.6%)

Executive compensation

  (4.8%)  (5.0%)  0.0%

Valuation allowance

  6.8%  (5.9%)  (9.4%)

Other

  (1.3%)  0.8%  (0.7%)

Total effective income tax rate

  (12.4%)  (8.3%)  (6.0%)

 

The Company, through its subsidiaries and affiliated entities in the U.S., the Cayman Islands, Ecuador and Tanzania are subject to US Federal, US state, Ecuadorian Federal and Tanzanian Federal income taxes. The Cayman Islands do not impose federal or local income taxes. The movement in the effective tax rate related to the foreign tax rate differential is driven by a change in the jurisdictional mix of the foreign earnings and smaller consolidated pre-tax losses in 2024.

 

Deferred tax (liabilities) assets, net, are comprised of the following:

 

  

As of December 31,

 

(In thousands)

 

2024

  

2023

 

Deferred tax assets:

        

Net operating loss carryforward

 $21,564  $26,086 

Disallowed interest carryforward

  18,256   15,286 

Other

  1,209   2,020 

Valuation allowance

  (23,362)  (24,726)

Total net deferred assets

  17,667   18,666 

Deferred tax liabilities:

        

Property and equipment

  (19,111)  (18,542)

Other

  (1,160)  (676)

Total net deferred liabilities

  (20,271)  (19,218)

Deferred tax (liabilities) assets

 $(2,604) $(552)

 

Deferred tax assets and liabilities are recorded on the consolidated balance sheet based on tax jurisdictions. For the years ended December 31, 2024 and 2023, the Company has recorded deferred tax assets of $0.9 million and $1.6 million, respectively, within other long-term assets, and for the years ended December 31, 2024 and 2023, a deferred tax liability of $3.5 million and $2.1 million, respectively.

 

The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, management considers: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in prior carryback year(s) if carryback is permitted under applicable tax law; and (iv) tax planning strategies.

 

The Company has deferred tax assets related to U.S. federal loss carryforwards of $81.2 million as of December 31, 2024, with an indefinite carryforward period. The timing and manner in which the Company will utilize the net operating loss carryforwards in any year, or in total, may be limited in the future as a result of changes in the Company’s ownership and any limitations imposed by the jurisdictions in which the Company operates. 

 

As a result of the transition to the territorial tax regime effectuated by the Tax Cuts and Jobs Act enacted in 2017, any potential dividends from the Company’s foreign subsidiaries would no longer be subject to Federal tax in the United States. The Company continue to assert its prior position regarding the repatriation of historical foreign earnings from its Ecuadorian subsidiaries. The Company currently has no intention to remit any additional undistributed earnings of its Ecuadorian subsidiaries in a taxable manner. The Company no longer remains permanently reinvested in the earnings of its Cayman subsidiary. No taxes have been accrued as a result of this change because no taxes are expected to be imposed by either the United States or the Cayman Islands upon such a remittance.

 

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. The Company establishes liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes may be due. These liabilities are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are fully supportable. The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of changes to these liabilities.

 

As of December 31, 2024 and 2023, the Company had no unrecognized tax positions. As of December 31, 2022, the Company had $1.4 million of unrecognized tax benefits. The Company has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2024, 2023 and 2022, interest and penalties included in income tax expense related to unrecognized tax benefits and/or uncertain tax positions were insignificant.

 

The Company is subject to tax audits in all jurisdictions for which it files tax returns. Tax audits by their very nature are often complex and can require several years to complete. Currently, there are no U.S. federal, state or foreign jurisdiction tax audits pending. The Company’s corporate U.S. federal and state tax returns for the current year and the four prior years remain subject to examination by tax authorities and the Company’s foreign tax returns for the current year and the five prior years remain subject to examination by tax authorities.