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Note 13 - Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

13. TAXES

 

We use the asset and liability method of accounting for income taxes based on ASC 740, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to reverse Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized.

 

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

 

($ in thousands)

 

2024

  

2023

  

2022

 

Federal:

            

Current

 $(926) $3,877  $5,993 

Deferred

  2,337   (977)  (1,417)

Total federal

  1,411   2,900   4,576 
             

State & local:

            

Current

  140   262   1,415 

Deferred

  148   123   (247)

Total state & local

  288   385   1,168 
             

Foreign

            

Current

  878   106   182 

Deferred

  94   337   (623)

Total foreign

  972   443   (441)
             

Total

 $2,671  $3,728  $5,303 

 

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)

 

2024

  

2023

  

2022

 

Expected expense at statutory rate

 $2,947  $2,975  $5,414 
             

Increase (decrease) in income taxes resulting from:

            

Tax on repatriated earnings from foreign operations

  399   190   316 

State and local income taxes

  227   407   734 

Tax rate differential effect of foreign operations

  230   106   160 

Permanent differences

  165   69   11 

Change in valuation allowance

  (200)  355   - 

Provision to return filing adjustments and other

  (117)  329   (352)

Foreign tax credit

  (468)  (227)  (348)

Exempt income from Dominican Republic operations due to tax holiday

  (512)  (476)  (632)

Total

 $2,671  $3,728  $5,303 

 

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2024 and 2023 consisted of the following:

 

($ in thousands)

 

2024

  

2023

    

Deferred tax assets:

           

Inventories

 $3,640  $2,428    

Lease assets

  1,252   1,853    

Asset valuation allowances and accrued expenses

  957   967    

Transaction costs

  608   684    

Net operating losses

  318   866    

163(J) Interest limitation

  262   4,644    

State and local income taxes

  195   305    

Pension and deferred compensation

  56   54    

Total deferred tax assets

  7,288   11,801    

Valuation allowances

  (155)  (355)   

Total deferred tax assets

  7,133   11,446    
            

Deferred tax liabilities:

           

Intangible assets

  11,908   11,713    

Fixed assets

  3,231   4,166    

Lease liabilities

  1,195   1,786    

Other assets

  587   748    

Tollgate tax on Lifestyle earnings

  228   228    

State and local income taxes

  28   280    

Total deferred tax liabilities

  17,177   18,921    

Net deferred tax liability

 $10,044  $7,475    

 

The valuation allowance as of December 31, 2024 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, 2024. 

 

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

  2021 

Various U.S. states

 

2020

 

Puerto Rico (U.S. territory)

 

2019

 

Canada

 

2019

 

China

 

2021

 

Mexico

 

2021

 

United Kingdom

 

2022

 

Australia

 

2022

 

 

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2024, 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.