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Note 13 - Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

13. TAXES 

 

We account for income taxes in accordance with the accounting standard for "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences.

 

A breakdown of our income tax expense (benefit) for the years ended December 31 is as follows:

 

($ in thousands)

  

2023

    

2022

    

2021

  

Federal:

                        

Current

   $ 3,877     $ 5,993     $ 1,554  

Deferred

     (977 )     (1,417 )     1,729  

Total Federal

     2,900       4,576       3,283  
                         

State & local:

                        

Current

     262       1,415       833  

Deferred

     123       (247 )     (176 )

Total State & local

     385       1,168       657  
                         

Foreign

                        

Current

     106       182       907  

Deferred

     337       (623 )     (37 )

Total Foreign

     443       (441 )     870  
                         

Total

   $ 3,728     $ 5,303     $ 4,810  

 

A reconciliation of recorded Federal income tax expense to the expected expense computed by applying the applicable Federal statutory rate for all periods to income before income taxes follows: 

 

   

Year Ended December 31,

  

($ in thousands)

  

2023

    

2022

    

2021

  

Expected expense at statutory rate

   $ 2,975     $ 5,414     $ 5,327  
                         

Increase (decrease) in income taxes resulting from:

                        

Exempt income from Dominican Republic operations due to tax holiday

     (476 )     (632 )     (1,238 )

Tax Rate Differential effect of Foreign Operations

     106       160       45  

Tax on repatriated earnings from Dominican Republic operations

     190       316       941  

State and local income taxes

     407       734       222  

Foreign Tax Credit

     (227 )     (348 )     (547 )

Meals and entertainment

     66       5       2  

Nondeductible penalties

     3       6       3  

Provision to return filing adjustments

     684       (352 )     55  

Total

   $ 3,728     $ 5,303     $ 4,810  

 

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2023 and 2022 consisted of the following:

 

($ in thousands)

  

2023

    

2022

  

Deferred tax assets:

                

Asset valuation allowances and accrued expenses

   $ 1,651     $ 2,257  

Inventories

     2,428       3,300  

State and local income taxes

     305       293  

Pension and deferred compensation

     54       42  

Net operating losses

     866       794  

163(J) Interest limitation

     4,644       1,077  

Lease asset

     1,853       2,608  

Total deferred tax assets

     11,801       10,371  

Valuation allowances

     (355 )     -  

Total deferred tax assets

     11,446       10,371  
                 

Deferred tax liabilities:

                

Fixed assets

     4,166       4,490  

Intangible assets

     11,713       10,262  

Other assets

     748       793  

Tollgate tax on Lifestyle earnings

     228       228  

State and local income taxes

     280       59  

Lease Liability

     1,786       2,545  

Total deferred tax liabilities

     18,921       18,377  
                 

Net deferred tax liability

   $ 7,475     $ 8,006  

 

The valuation allowance as of December 31, 2023 is related to certain foreign income tax net operating loss carry forwards.

 

We have provided Puerto Rico tollgate taxes on approximately $3.7 million of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994, that would be payable if such earnings were repatriated to the United States. In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to June 30, 1994; thus no other provision for tollgate tax has been made on earnings after that date. If we repatriate the earnings from Lifestyle, $0.2 million of tollgate tax would be due as of December 31, 2023. 

 

We are subject to tax examinations in various taxing jurisdictions. The earliest exam years open for examination are as follows:

 

   

Earliest Exam Year

  

Taxing Authority Jurisdiction:

        

U.S. Federal

     2020  

Various U.S. States

  

2019

  

Puerto Rico (U.S. Territory)

  

2018

  

Canada

  

2018

  

China

  

2020

  

Mexico

  

2021

  

United Kingdom

  

2021

  

Australia

  

2021

  

 

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2023, no such expenses were recognized during the year. We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

 

Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.  Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the standard.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations.