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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8. Income Taxes The provision (benefit) for income taxes consists of the following:
|  | Year Ended |
|  | December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | (in thousands) |
Federal: |  |  |  |  |  |  |  |  |
Current |  | $ | (579 | ) |  | $ | (511 | ) |  | $ | 8,518 |
Deferred |  |  | 4,667 |  |  |  | 701 |  |  |  | 714 |
Total Federal |  |  | 4,088 |  |  |  | 190 |  |  |  | 9,232 |
State and Local: |  |  |  |  |  |  |  |  |
Current |  |  | (762 | ) |  |  | 769 |  |  |  | 3,476 |
Deferred |  |  | 1,602 |  |  |  | 346 |  |  |  | (221 | )
Total State and Local |  |  | 840 |  |  |  | 1,115 |  |  |  | 3,255 |
Foreign |  |  |  |  |  |  |  |  |
Current |  |  | 255 |  |  |  | 1,051 |  |  |  | 1,249 |
Deferred |  |  | (90 | ) |  |  | 72 |  |  |  | (25 | )
Total Foreign |  |  | 165 |  |  |  | 1,123 |  |  |  | 1,224 |
Total |  | $ | 5,093 |  |  | $ | 2,428 |  |  | $ | 13,711 |
The reconciliation between the provision (benefit) for income taxes and the expected provision (benefit) for income taxes at the U.S. federal statutory rate is as follows:
|  | Year Ended |
|  | December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | (in thousands) |
U.S. Operations |  | $ | (53,947 | ) |  | $ | 15,146 |  |  | $ | 46,970 |
Foreign Operations |  |  | (506 | ) |  |  | 5,003 |  |  |  | 5,487 |
Income (loss) before income taxes |  |  | (54,453 | ) |  |  | 20,149 |  |  |  | 52,457 |
Federal statutory rate |  |  | 21 | % |  |  | 21 | % |  |  | 21 | %
Provision (benefit) for income taxes at federal statutory rate |  |  | (11,435 | ) |  |  | 4,231 |  |  |  | 11,016 |
State taxes, net of federal benefit |  |  | (2,098 | ) |  |  | 812 |  |  |  | 1,434 |
Foreign tax rate differential |  |  | 90 |  |  |  | (60 | ) |  |  | 4 |
Change in valuation allowance |  |  | 18,353 |  |  |  | — |  |  |  | (2 | )
Excess tax benefit recognized |  |  | (232 | ) |  |  | (2,159 | ) |  |  | (413 | )
Foreign Derived Intangible Income (a) |  |  | — |  |  |  | (976 | ) |  |  | — |
Foreign tax credit |  |  | — |  |  |  | (770 | ) |  |  | (568 | )
R&D Credit (b) |  |  | (400 | ) |  |  | (878 | ) |  |  | — |
Global intangible low taxed income |  |  | 325 |  |  |  | 530 |  |  |  | 586 |
Prior year adjustment |  |  | — |  |  |  | — |  |  |  | 16 |
Change in unrecognized tax benefits |  |  | (382 | ) |  |  | 673 |  |  |  | 969 |
Section 162(m) |  |  | 395 |  |  |  | 634 |  |  |  | 414 |
Other |  |  | 477 |  |  |  | 391 |  |  |  | 255 |
Provision for income taxes |  | $ | 5,093 |  |  | $ | 2,428 |  |  | $ | 13,711 |
(a) The Company completed an analysis of its export sales during 2021. The FDII benefit is for the 2020 and 2021 tax years. (b) The Company completed a Research and Development credit analysis study during 2021. The R&D credit benefit is for the 2018 through 2021 tax years. The tax effects of significant items comprising the Company’s deferred tax assets (liabilities) are as follows:
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | (in thousands) |
Allowance for doubtful accounts |  | $ | 4 |  |  | $ | 4 |
Fixed assets |  |  | (897 | ) |  |  | (250 | )
Goodwill |  |  | (1,268 | ) |  |  | (1,162 | )
Employee benefits |  |  | 2,254 |  |  |  | 1,980 |
Intangible assets |  |  | 1,573 |  |  |  | 1,053 |
Inventories |  |  | 2,846 |  |  |  | 1,559 |
Lease liability |  |  | 2,227 |  |  |  | 1,655 |
Net operating loss |  |  | 7,354 |  |  |  | 1,271 |
Research and development expenses |  |  | 3,835 |  |  |  | — |
Right of use asset |  |  | (2,010 | ) |  |  | (1,547 | )
Sales reserves |  |  | 1,501 |  |  |  | 1,520 |
Unrecognized tax benefits |  |  | 470 |  |  |  | 575 |
Other |  |  | 852 |  |  |  | (68 | )
|  |  | 18,741 |  |  |  | 6,590 |
Valuation allowance |  |  | (19,244 | ) |  |  | (891 | )
Net deferred tax assets (liabilities) |  | $ | (503 | ) |  | $ | 5,699 |
At December 31, 2022, the Company had $24.6 million of indefinite lived federal net operating loss carryforwards and $34.6 million of state net operating loss carryforwards, which will begin to expire in 2029. As of December 31, 2022, $23.9 million of federal net operating losses are carried forward as indefinite-lived net operating losses. As of December 31, 2022, the Company has federal research and development credit carryforwards of $0.3 million, which will expire in 2042 if unutilized, and state research and development credit carryforwards of $0.4 million, which carryforward until exhausted. Utilization of these operating loss carryforwards and credits may be subject to an annual limitation based on changes in ownership, as defined by Section 382 & 383 of the Internal Revenue Code of 1986, as amended. As required by the authoritative guidance on accounting for income taxes the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred taxes will not be realized. The Company considers all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. The significant current year pre-tax loss, coupled with cumulative book losses projected in early future years, is significant negative evidence considered by the Company in recording an $18.4 million increase to the valuation allowance as of December 31, 2022. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | (in thousands) |
Gross unrecognized tax benefit, beginning of period |  | $ | 3,415 |  |  | $ | 3,090 |
Additions based on tax positions related to the current year |  |  | 150 |  |  |  | 573 |
Additions related to tax positions in a prior year |  |  | 158 |  |  |  | — |
Settlements related to tax positions in a prior period |  |  | (321 | ) |  |  | — |
Decreases based on tax positions in a prior period |  |  | (400 | ) |  |  | (248 | )
Gross unrecognized tax benefit, end of period |  | $ | 3,002 |  |  | $ | 3,415 |
The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold, and establishes tax reserves for uncertain tax positions that do not meet this threshold. The Company settled uncertain tax positions in certain jurisdictions, of approximately $0.3 million for the year ended December 31, 2022; no ne were settled for the year ended December 31, 2021. To the extent these unrecognized tax benefits are ultimately recognized, approximately $2.7 million will impact the Company’s effective tax rate and $0.3 million will be offset by a valuation allowance in future periods. The Company is filing for relief provisions in certain jurisdictions and based on such anticipated filings, it is reasonably possible that amounts of unrecognized tax benefits could decrease by $0.7 million within the next twelve months. Interest and penalties associated with income tax matters are included in the provision for income taxes. As of December 31, 2022, the Company had uncertain tax positions of $2.9 million, inclusive of $0.8 million of interest and penalties. The Company is not currently under examination by federal, state or foreign taxing jurisdictions. Further, at any given time, multiple tax years may be subject to examination by various taxing authorities. The recorded amounts of income tax are subject to adjustment upon examination, changes in interpretation and changes in judgment utilized in determining estimates. The Company considers the earnings of its foreign entities to be permanently reinvested outside the United States based on estimates that future cash generation will be sufficient to meet future domestic cash needs. Accordingly, deferred taxes have not been recorded for the undistributed earnings of the Company's foreign subsidiaries. As a result of the Tax Cuts and Jobs Act (“TCJA”) and the current U.S. taxation of deemed repatriated earnings, the additional taxes that might be payable upon repatriation of foreign earnings are not significant. The TCJA introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under the base erosion anti-abuse tax “BEAT” regime. For the years ended December 31, 2022 and 2021, the Company did not generate intercompany transactions that met the BEAT threshold but does have to include GILTI relating to the Company's foreign subsidiaries. The Company elected to account for GILTI as a current period cost. The Company files U.S., state, and foreign income tax returns in jurisdictions with various statutes of limitations. Below is a summary of the filing jurisdictions and open tax years:
|  | Open Years
U.S. Federal |  | 2019 - 2021
U.S. State and Local |  | 2018 - 2021
Non-U.S. |  | 2019 - 2021
On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. The Company included the impact of the research and development expenditures in its December 31, 2022 tax expense. The Inflation Reduction Act includes a 1% excise tax on publicly traded US corporations for the value of its stock repurchased after December 31, 2022. The Company does not expect the impact of the excise tax to be material to its financial statement. The Company will continue to monitor possible future impact of changes in tax legislation.

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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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