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Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

10. Income taxes:


The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34% to income before provision for income taxes as a result of the following:


   

Year ended

December 31,

2015

    

Year ended

December 31,

2014

    

Year ended

December 31,

2013

  

Income for the year before provision for income taxes

   $ 17,942,957     $ 9,428,325     $ 5,799,803  

Computed expected tax expense

   $ 6,100,605     $ 3,205,631     $ 1,971,933  

Increase (reduction) in income tax expense resulting from:

                        

State income taxes

     265,489       64,056       14,500  

Permanent differences, including foreign exchange

     278,959       192,260       13,700  

Investment tax credits recovered

     —       —       (115,455

)

Other, including alternative minimum tax and adjustments to opening deferred tax assets

     (75,826

)

     (407,718

)

     (265,339

)

Provision for income taxes

   $ 6,569,227     $ 3,054,229     $ 1,619,339  

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2015 and 2014 are presented below:


   

December 31,

2015

    

December 31,

2014

  

Deferred tax assets:

                

Deferred revenue

   $ 5,454,284     $ 5,294,767  

Foreign tax credit

     1,529,075       3,200,961  

Amortization

     (883,466 )     (414,345 )

Accruals, including foreign exchange and other

     1,521,199       (702,764

)

Deferred tax assets

   $ 7,621,092     $ 7,378,619  
                 

Deferred income tax asset, current portion

   $ 3,243,718     $ 2,498,196  

Deferred income tax asset, long-term portion

     4,377,374       4,880,423  
    $ 7,621,092     $ 7,378,619  

Deferred tax liabilities:

                

Limited life intangible assets

   $ (169,731

)

   $ (208,620

)

Indefinite life intangible assets

     (4,706,960

)

     (4,578,731

)

Total deferred tax liability, long-term portion

   $ (4,876,691

)

   $ (4,787,351

)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment.


The Company had approximately $0.1 million of total gross unrecognized tax benefit as of December 31, 2015 and as of December 31, 2014, which if recognized would favorably affect its income tax rate in future periods. The unrecognized tax benefit relates primarily to prior year Pennsylvania state franchise taxes and other insignificant U.S. state taxes.


The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. The Company did not have any significant interest and penalties accrued as of December 31, 2015 and December 31, 2014.


Management believes that it is reasonably possible that $0.1 million of the unrecognized tax benefit will decrease in the next twelve months as it is anticipated that the foreign tax authorities will finalize their review of prior years’ taxes owing in Pennsylvania within that period.


The following is a reconciliation of Tucows’ change in uncertain tax position:


Total Gross Unrecognized Tax Benefits

  

December 31, 2015

    

December 31, 2014

  

Balance, beginning of year

   $ 117,000     $ 117,000  

Change in uncertain tax benefits

     —       —  

Balance, end of year

   $ 117,000     $ 117,000