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INCOME TAXES

12 Months Ended

Dec. 31, 2020

INCOME TAXES

INCOME TAXES

NOTE 15—INCOME TAXES

The components of income before income taxes for the years ended December 31, 2020 and 2019 consists of the following:


		Years Ended December 31,
		2020			2019
Domestic		$	(3,361)		$	1,206
Foreign			9,229			5,933
Total income before income taxes		$	5,868		$	7,139

The components of the 2020 and 2019 income tax provision are as follows:


		Years Ended December 31,
		2020			2019
Current:
Federal		$	(1,368)		$	(327)
State			564			603
Foreign			3,088			2,431
Total current provision			2,284			2,707
Deferred:
Federal			365			(123)
State			(68)			(140)
Foreign			532			1,354
Total deferred benefit			829			1,091
Total		$	3,113		$	3,798

The differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 21% for both years ended December 31, 2020 and 2019 were as follows:


		Years Ended December 31,
		2020			2019
Tax provision computed at 21%		$	1,232		$	1,499
Nondeductible expenses			718			521
State income taxes, net of federal benefit			400			327
Tax impact of foreign operations			339			1,347
Valuation allowances increase (release)			517			(141)
Net increase (decrease) of uncertain tax positions			(34)			(34)
Other			(59)			279
Income tax provision		$	3,113		$	3,798
Effective income tax rates			53.1	%		53.2	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:


		December 31,
		2020			2019
Noncurrent deferred tax asset
Compensation related expenses		$	2,081		$	2,279
Foreign currency translation			1,697			2,458
U.S. foreign tax credit carryovers			1,194			879
Foreign net operating loss carryovers			4,943			5,563
Accruals and reserves			1,026			1,404
Operating lease right-of-use assets			1,396			2,034
Other			405			224
Valuation allowance for deferred tax assets			(3,707)			(3,989)
Total noncurrent deferred tax asset			9,035			10,852
Noncurrent deferred tax liability
Depreciable assets			(699)			(510)
Prepaids			(428)			(514)
Intangible assets			(911)			(1,177)
Investment in foreign subsidiaries			(3,664)			(3,323)
Foreign earnings distribution taxes			(851)			(1,741)
Foreign intangibles and reserves			(2,888)			(1,754)
Operating lease liabilities			(1,160)			(1,716)
Total noncurrent deferred tax liability			(10,601)			(10,735)
Net noncurrent deferred tax (liability) asset			(1,566)			117
Net deferred tax (liability) asset		$	(1,566)		$	117

A valuation allowance was established at December 31, 2020 and 2019 due to estimates of future utilization of net operating loss carryovers in the U.S. and certain foreign jurisdictions, derived primarily from acquisitions and recorded through purchase accounting. The valuation allowance at December 31, 2020 and 2019 also includes a full valuation for the Company’s foreign tax credit carryovers and foreign taxes on its controlled foreign corporations.

As of December 31, 2020, the Company has foreign net operating loss (NOL) carryforwards of approximately $14.3 million. If not utilized, these NOL carryforwards begin to expire in 2021. The Company also has a federal tax credit carryforward of approximately $1.2 million, which will begin to expire in 2026, if not utilized.

Uncertain tax positions

Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. It is the Company’s policy to accrue for interest and penalties related to its uncertain tax positions within income tax expense.

A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows:


		December 31,
		2020			2019
Balance, beginning of year		$	1,534		$	1,475
Additions as a result of tax positions taken during the current period			69			90
Reductions as a result of tax positions taken during a prior period			(34)			—
Reductions as a result of lapse of statute			—			(31)
Balance, end of year		$	1,569		$	1,534

We do not expect our unrecognized tax benefits to significantly change in the next twelve months.

The Company has recognized through income tax expense approximately $0.9 million of interest and penalties related to uncertain tax positions. The amount of unrecognized tax benefit, if recognized, that would impact the effective tax rate is $1.6 million. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2013.