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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before provision for income taxes is as follows:
| For the year ended December 31,
| 2021 |  | 2020 |  | 2019
Income (loss) before provision for income taxes from: |  |  |  |  |
U.S. operations | $ | 1,527 |  |  | $ | (54,190) |  |  | $ | 7,334 |
Foreign operations | 5,761 |  |  | (59,982) |  |  | 3,105 |
Income (loss) before income taxes | $ | 7,288 |  |  | $ | (114,172) |  |  | $ | 10,439 |
The provision for income taxes consists of the following:
| For the year ended December 31,
| 2021 |  | 2020 |  | 2019
Current |  |  |  |  |
Federal | $ | (182) |  |  | $ | (6,278) |  |  | $ | 2,712 |
States and local | 246 |  |  | 528 |  |  | 519 |
Foreign | 3,641 |  |  | 4,006 |  |  | 4,572 |
Reserve for uncertain tax positions | (186) |  |  | (28) |  |  | 99 |
Total current provision (benefit) | 3,519 |  |  | (1,772) |  |  | 7,902 |
Deferred |  |  |  |  |
Federal | (309) |  |  | (2,781) |  |  | 315 |
States and local | (138) |  |  | (1,244) |  |  | (32) |
Foreign | (1,884) |  |  | (10,045) |  |  | (4,095) |
Reserve for uncertain tax positions | 155 |  |  | — |  |  | — |
Total deferred provision (benefit) | (2,176) |  |  | (14,070) |  |  | (3,812) |
Net change in valuation allowance | 2,052 |  |  | 1,136 |  |  | 269 |
Net deferred provision (benefit) | (124) |  |  | (12,934) |  |  | (3,543) |
Total provision (benefit) for income taxes | $ | 3,395 |  |  | $ | (14,706) |  |  | $ | 4,359 |
The provision (benefit) for income taxes differs from the amount computed by applying the statutory federal tax rate to income tax as follows:
| For the years ended December 31,
| 2021 |  | 2020 |  | 2019
Federal tax at statutory rate | $ | 1,527 |  |  | 21.0 | % |  | $ | (23,976) |  |  | 21.0 | % |  | $ | 2,192 |  |  | 21.0 | %
State taxes, net of federal benefit | 75 |  |  | 1.0 | % |  | (1,175) |  |  | 1.0 | % |  | 377 |  |  | 3.6 | %
Foreign tax | 380 |  |  | 5.2 | % |  | (815) |  |  | 0.7 | % |  | 982 |  |  | 9.4 | %
Goodwill impairment | — |  |  | — | % |  | 10,003 |  |  | (8.8) | % |  | — |  |  | — | %
Nondeductible compensation | 119 |  |  | 1.6 | % |  | 975 |  |  | (0.9) | % |  | 1,581 |  |  | 15.2 | %
US taxation of foreign earnings | (1,041) |  |  | (14.3) | % |  | 56 |  |  | — | % |  | 213 |  |  | 2.0 | %
Permanent differences | 373 |  |  | 5.1 | % |  | 944 |  |  | (0.8) | % |  | 464 |  |  | 4.4 | %
Federal loss carryback | — |  |  | — | % |  | (1,938) |  |  | 1.7 | % |  | — |  |  | — | %
Change in valuation allowance | 2,052 |  |  | 28.2 | % |  | 1,136 |  |  | (1.0) | % |  | 269 |  |  | 2.6 | %
Impact of foreign tax rate changes | 49 |  |  | 0.7 | % |  | 392 |  |  | (0.3) | % |  | (1,882) |  |  | (18.0) | %
Other | (139) |  |  | (1.9) | % |  | (308) |  |  | 0.3 | % |  | 163 |  |  | 1.6 | %
Total provision (benefit) for income taxes | $ | 3,395 |  |  | 46.6 | % |  | $ | (14,706) |  |  | 12.9 | % |  | $ | 4,359 |  |  | 41.8 | %
The permanent differences identified above include normal recurring differences, such as meals, entertainment and parking fringe benefits as well as a portion of the goodwill impairment charge. On December 22, 2017, the United States enacted fundamental changes to the federal tax law following the passage of the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act is complex and significantly changes the U.S. corporate tax system by, among other things, (a) reducing the federal corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, (b) replacing the prior system of taxing corporations on foreign earnings of their foreign subsidiaries when the earnings are repatriated with a partial territorial tax system that provides a 100% dividends-received deduction (DRD) to domestic corporations for foreign-sourced dividends received from 10%-or-more owned foreign corporations, (c) subjecting certain unrepatriated foreign earnings to a mandatory one-time transition tax on post-1986 earnings and profits ("the transition tax"), and (d) further limiting a public entity's ability to deduct compensation in excess of $1 million for covered employees. On June 28, 2019, the Canadian province of Alberta enacted the Job Creation Tax Cut which reduced the Alberta corporate income tax rate from 12% to 11% starting in 2019 with further annual reductions to 10% in 2020, 9% in 2021, and 8% in 2022. This rate reduction had a favorable impact of approximately $1.9 million on the Company’s net deferred tax liabilities in this jurisdiction in 2019. As part of Alberta’s Recovery plan associated with the COVID-19 pandemic, Alberta accelerated the decrease in income tax rates from 10% in 2020 to 8% effective July 1, 2020. The accelerated tax rate reduction did not have a material impact on the Company’s net deferred tax liabilities but did reduce current taxes. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions. Some of these tax provisions are effective retroactively for years ending before the date of enactment. The CARES Act provides a five-year carryback of net operating losses generated in years 2018 through 2020. As the statutory federal income tax rate applicable to certain years within the carryback period is 35%, carryback to those years of our estimated 2020 annual federal tax loss provides a tax benefit in excess of the current federal statutory rate of 21%, resulting in an increased income tax benefit of $1.9 million. The Company expects that the income tax effects of the CARES Act will result in a cash refund of approximately $4.9 million in 2021 of taxes paid in prior years. On December 27, 2020, the United States enacted the Consolidated Appropriations Act, 2021, (the "Appropriations Act") an additional stimulus package providing financial relief for individuals and small business. The Appropriations Act contains a variety of tax provisions, including full expensing of business meals in 2021 and 2022, and expansion of the employee retention tax credit. The Company does not currently expect the Appropriations Act to have a material impact on our consolidated financial position, results of operations, and cash flows. In response to the COVID-19 pandemic, the American Rescue Plan Act was signed into law on March 11, 2021. This act, among other things, provides economic relief provisions to individuals and funding to certain businesses and programs. The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows, but does not expect it to have a material impact. Deferred income tax attributes resulting from differences between financial accounting amounts and income tax basis of assets and liabilities are as follows:
| December 31,
| 2021 |  | 2020
Deferred income tax assets |  |  |
Allowance for doubtful accounts | $ | 677 |  |  | $ | 1,054 |
Inventory | 567 |  |  | 459 |
Intangible assets | 1,733 |  |  | 2,000 |
Accrued expenses | 5,662 |  |  | 6,818 |
Net operating loss carryforward | 6,303 |  |  | 4,190 |
Finance lease obligations | 741 |  |  | 942 |
Deferred stock based compensation | 996 |  |  | 920 |
Interest carryforward | 618 |  |  | — |
Right-of-use liability | 10,786 |  |  | 11,970 |
Credits | 409 |  |  | 312 |
Other | 1,353 |  |  | 1,507 |
Deferred income tax assets | 29,845 |  |  | 30,172 |
Valuation allowance | (6,340) |  |  | (4,540) |
Net deferred income tax assets | 23,505 |  |  | 25,632 |
Deferred income tax liabilities |  |  |
Property and equipment | (8,157) |  |  | (9,109) |
Goodwill | (5,819) |  |  | (4,639) |
Intangible assets | (4,935) |  |  | (6,058) |
Right-of-use asset | (10,738) |  |  | (11,924) |
Other | (67) |  |  | (69) |
Deferred income tax liabilities | (29,716) |  |  | (31,799) |
Net deferred income taxes | (6,211) |  |  | (6,167) |
As of December 31, 2021, the Company had federal net operating loss carry forwards (NOLs) of approximately $7.7 million expiring in 2032 which may be used subject to limitation under Internal Revenue Code section 382. In addition, as of December 31, 2021, the Company had state and foreign NOLs of $17.6 million and $12.8 million, respectively. Approximately $11.1 million of the state NOLs expire at various times from 2031 to 2040, while the remainder of the Company's state NOLs do not expire. Approximately $0.6 million of the foreign NOLs expire at various times from 2023 to 2040, while the remainder of the Company's foreign NOLs do not expire. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Valuation allowances are provided when management believes the Company's deferred tax assets are not recoverable based on future reversals of existing taxable temporary differences, taxable income in prior carryback year(s) if carryback is permitted under the tax law, and an assessment of estimated future taxable income, exclusive of reversing temporary differences and carryforwards, that incorporates ongoing, prudent and feasible tax planning strategies. At December 31, 2021 and December 31, 2020, the Company has a valuation allowance of approximately $6.3 million and $4.5 million, respectively, primarily against certain state and foreign NOLs and other specific deferred tax assets. The valuation allowance as of December 31, 2020, also applied against capital losses generated by the disposals of certain foreign subsidiaries. These losses expired in 2020, so no valuation allowance remains as of December 31, 2021. The net increase in the valuation allowance of approximately $1.8 million is primarily attributable to state and foreign net operating losses and changes in foreign exchange rates, offset by a reduction of expiring losses. Except for those deferred tax assets subject to the valuation allowance, management believes that it will realize all deferred tax assets as a result of sufficient future taxable income in each tax jurisdiction in which the Company has deferred tax assets. The following table summarizes the changes in the Company’s gross unrecognized tax benefits, excluding interest and penalties:
| For the year ended December 31,
| 2021 |  | 2020
Balance at beginning of period | $ | 347 |  |  | $ | 393 |
Additions for tax positions related to the current fiscal period | 155 |  |  | — |
Additions for tax positions related to prior years | 1 |  |  | 32 |
Impact of foreign exchange fluctuation | — |  |  | (5) |
Reductions related to the expiration of statutes of limitations | (203) |  |  | (73) |
Balance at end of period | $ | 300 |  |  | $ | 347 |
The Company has recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets. As of December 31, 2021 and December 31, 2020, there were approximately $0.3 million and $0.3 million of unrecognized tax benefits, respectively, including penalties and interest. If the Company recognized these unrecognized tax benefits, approximately $0.3 million and $0.2 million would favorably affect the effective tax rate for both December 31, 2021 and December 31, 2020, respectively. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense and are not significant for the years ended December 31, 2021, 2020 and 2019. The Company anticipates a decrease to its unrecognized tax benefits of $0.1 million excluding interest and penalties within the next 12 months. The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years ending before December 31, 2017 and generally is no longer subject to state, local or foreign income tax examinations by tax authorities for years ending before December 31, 2016. Net income (loss) of foreign subsidiaries was $3.7 million, $(55.7) million, and $2.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. Generally, it has been the Company's practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those operations. As previously noted, the Tax Act made significant changes to the taxation of undistributed earnings, requiring that all previously untaxed earnings and profits of the Company's controlled foreign operations be subjected to the transition tax. Since these earnings have now been subjected to U.S. federal tax, they would only be potentially subject to limited other taxes, including foreign withholding and certain state taxes. As of December 31, 2021, the Company has not recognized a deferred tax liability for foreign withholdings and state taxes on its undistributed international earnings or losses of its foreign subsidiaries since it intends to indefinitely reinvest the earnings outside the United States. The Company has estimated that the amount of the unrecorded deferred tax liability related to undistributed international earnings is approximately $1.5 million.

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