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Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9

. 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, 201 6				Year ended December 31, 201 5				Year ended December 31, 201 4
Income for the year before provision for income taxes		$	25,112,924			$	17,942,957			$	9,428,325
Computed expected tax expense		$	8,538,245			$	6,100,605			$	3,205,631
Increase (reduction) in income tax expense resulting from:
State income taxes			530,803				265,489				64,056
Permanent differences, including foreign exchange			290,327				278,959				192,260
Other, including alternative minimum tax and adjustments to opening deferred tax assets			(313,605	)			(75,826	)			(407,718	)
Provision for income taxes		$	9,045,770			$	6,569,227			$	3,054,229

The tax effects of

temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of

December

 

31,

2016,

and

2015

are presented below:

		December 31, 201 6				December 31, 201 5
Deferred tax assets:
Deferred revenue		$	5,482,080			$	5,454,284
Foreign tax credit			1,275,937				1,529,075
Amortization			(2,184,944	)			(883,466	)
Accruals, including foreign exchange and other			1,135,652				1,521,199
Deferred tax assets		$	5,708,725			$	7,621,092
Deferred tax liabilities:
Limited life intangible assets		$	(120,232	)		$	(169,731
Indefinite life intangible assets			(4,706,960	)			(4,706,960	)
Total deferred tax liability, long-term portion		$	(4,827,192	)		$	(4,876,691	)

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,

2016,

and as of

December

31,

2015,

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,

 

2016,

and

December

 

31,

 

2015.

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, 201 6				December 31, 201 5
Balance, beginning of year		$	117,000			$	117,000
Change in uncertain tax benefits			—				—
Balance, end of year		$	117,000			$	117,000

X

- References

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- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319

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