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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s operations are conducted through various subsidiaries in a number of countries throughout the world. The Company has provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Income tax expense (benefit). Pre-tax income (loss) for the years ended December 31, 2023, 2022 and 2021 consisted of the following (in thousands):
| 2023 |  | 2022 |  | 2021
Canada operations | $ | 5,524 |  |  | $ | 3,040 |  |  | $ | 2,498 |
Foreign operations | 34,839 |  |  | 7,692 |  |  | 3,375 |
Total | $ | 40,363 |  |  | $ | 10,732 |  |  | $ | 5,873 |
The components of the income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 consisted of the following (in thousands):
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Canada | $ | 142 |  |  | $ | 31 |  |  | $ | 141 |
Foreign | 3,685 |  |  | 194 |  |  | 165 |
Total | $ | 3,827 |  |  | $ | 225 |  |  | $ | 306 |
Deferred: |  |  |  |  |
Canada | $ | — |  |  | $ | — |  |  | $ | — |
Foreign | 6,806 |  |  | 4,177 |  |  | 3,070 |
Total | $ | 6,806 |  |  | $ | 4,177 |  |  | $ | 3,070 |
Net income tax expense (benefit) | $ | 10,633 |  |  | $ | 4,402 |  |  | $ | 3,376 |
The net income tax expense (benefit) differs from an amount computed at Canadian statutory rates as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):
| 2023 |  | 2022 |  | 2021 |
Canadian federal tax benefit at statutory rates | $ | 6,054 |  |  | 15.0 | % |  | $ | 1,610 |  |  | 15.0 | % |  | $ | 779 |  |  | 13.3 | % |
Canadian provincial income tax | 497 |  |  | 1.2 | % |  | 282 |  |  | 2.6 | % |  | 215 |  |  | 3.7 | % |
Effect of foreign income tax, net | 5,481 |  |  | 13.6 | % |  | 1,809 |  |  | 16.9 | % |  | 1,189 |  |  | 20.2 | % |
Valuation allowance | (2,556) |  |  | (6.3) | % |  | 153 |  |  | 1.4 | % |  | 1,028 |  |  | 17.5 | % |
Noncontrolling interest | 125 |  |  | 0.3 | % |  | (562) |  |  | (5.2) | % |  | — |  |  | — | % |
Non-deductible compensation | 1,009 |  |  | 2.5 | % |  | 808 |  |  | 7.5 | % |  | 526 |  |  | 9.0 | % |
Unrealized intercompany foreign currency translation gain | (148) |  |  | (0.4) | % |  | (250) |  |  | (2.3) | % |  | (708) |  |  | (12.1) | % |
Deemed income from foreign subsidiaries | 322 |  |  | 0.8 | % |  | 331 |  |  | 3.1 | % |  | 297 |  |  | 5.1 | % |
Other, net | (151) |  |  | (0.4) | % |  | 221 |  |  | 2.0 | % |  | 50 |  |  | 0.8 | % |
Net income tax expense (benefit) | $ | 10,633 |  |  | 26.3 | % |  | $ | 4,402 |  |  | 41.0 | % |  | $ | 3,376 |  |  | 57.5 | % |
Deferred Tax Liabilities and Assets. The significant items giving rise to the deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows (in thousands):
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating loss | $ | 54,274 |  |  | $ | 75,326 |
Employee benefits | 1,796 |  |  | 2,810 |
Deductible goodwill and other intangibles | 48,201 |  |  | 48,432 |
Land | 3,461 |  |  | 3,159 |
Other reserves | 7,890 |  |  | 7,439 |
Deferred revenue | 2,381 |  |  | — |
Operating lease liabilities | 3,199 |  |  | 4,133 |
Capital losses | 2,036 |  |  | 1,930 |
Other | 1,770 |  |  | 2,303 |
Deferred tax assets | 125,008 |  |  | 145,532 |
Valuation allowance | (78,769) |  |  | (82,905) |
Deferred tax assets, net | $ | 46,239 |  |  | $ | 62,627 |
Deferred tax liabilities: |  |  |
Intangibles | $ | (18,949) |  |  | $ | (20,098) |
Depreciation | (36,048) |  |  | (43,394) |
Operating lease right-of-use assets | (3,045) |  |  | (3,913) |
Deferred tax liabilities | (58,042) |  |  | (67,405) |
Net deferred tax liabilities, net | $ | (11,803) |  |  | $ | (4,778) |
At December 31, 2023 and 2022, we had no undistributed earnings of foreign subsidiaries that would be subject to income tax upon distribution to Canada from a foreign subsidiary. As such, as of December 31, 2023 and 2022, we did not provide for deferred taxes on any such earnings of our foreign subsidiaries. NOL Carryforwards. The following table summarizes net operating loss (NOL) carryforwards at December 31, 2023 (in thousands):
| Amount |  | Expiration Period
Net operating loss carryforwards: |  |  |
Canada – Federal and provincial | $ | 144,242 |  |  | Begins to expire in 2035
U.S. – Federal | 34,028 |  |  | Begins to expire in 2036
U.S. – Federal | 30,655 |  |  | Does not expire
U.S. – State, tax effected | 6,073 |  |  | Begins to expire in 2024
Change in Valuation Allowance. Realization of our deferred tax assets is dependent upon, among other things, our ability to generate taxable income of the appropriate character in the future. Changes in our valuation allowance for the years ended December 31, 2023 and 2022 are as follows (in thousands):
Balance as of December 31, 2021 | $ | (85,351) |
Change in income tax provision | (153) |
Other change | (1,178) |
Foreign currency translation | 3,777 |
Balance as of December 31, 2022 | (82,905) |
Change in income tax provision | 2,556 |
Other change | 1,767 |
Foreign currency translation | (187) |
Balance as of December 31, 2023 | $ | (78,769) |
As of each reporting date, management considers new evidence, both positive and negative, that could affect our view of the future realization of deferred tax assets. As of December 31, 2023, management determined that there is not sufficient evidence to conclude that it is more likely than not that the Canadian and U.S. net deferred tax assets are realizable, therefore we have maintained the valuation allowance in both of these jurisdictions. As of December 31, 2023, management determined that there is not sufficient evidence to conclude that it is more likely than not that the Australia deferred tax assets related to certain capital assets are realizable, therefore we have maintained a partial valuation allowance in Australia. Unrecognized Tax Benefits. We file tax returns in the jurisdictions in which they are required. All of these returns are subject to examination or audit and possible adjustment as a result of assessments by taxing authorities. We believe that we have recorded sufficient tax liabilities and do not expect the resolution of any examination or audit of our tax returns to have a material adverse effect on our operating results, financial condition or liquidity. Our Canadian federal tax returns subsequent to 2018 are subject to audit by the Canada Revenue Agency. Our Australian subsidiary’s federal income tax returns subsequent to 2018 are open for review by the Australian Taxation Office. Our U.S. subsidiary’s federal tax returns subsequent to 2019 are subject to audit by the U.S. Internal Revenue Service. The total amount of unrecognized tax benefits as of December 31, 2023, 2022 and 2021 was zero. Unrecognized tax benefits, if recognized, would affect the effective tax rate. We accrue interest and penalties, if applicable, related to unrecognized tax benefits as a component of our provision for income taxes. As of December 31, 2023, 2022 and 2021, we had accrued zero of interest expense and penalties.

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