XML 32 R17.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Note 9 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
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, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Income for the year before provision for income taxes |  | $ | 24,074,768 |  |  | $ | 25,112,924 |  |  | $ | 17,942,957 |
Computed tax expense |  |  | 8,185,420 |  |  |  | 8,538,245 |  |  |  | 6,100,605 |
Increase (reduction) in income tax expense resulting from: |  |  |  |  |  |  |  |  |
State income taxes |  |  | 656,603 |  |  |  | 530,803 |  |  |  | 265,489 |
Effect of the decrease in Federal tax rate on deferred taxes |  |  | (10,036,080 | ) |  |  | - |  |  |  | - |
Valuation allowance on pre-2017 Foreign Tax Credits |  |  | 1,275,937 |  |  |  | - |  |  |  | - |
Non-creditable 2017 Foreign Tax |  |  | 2,903,400 |  |  |  | - |  |  |  | - |
Excess tax benefits on share-based compensation expense |  |  | (2,796,171 | ) |  |  | - |  |  |  | - |
Permanent differences |  |  | 1,635,611 |  |  |  | 290,327 |  |  |  | 278,959 |
Others |  |  | (76,546 | ) |  |  | (313,605 | ) |  |  | (75,826 | )
Provision for income taxes |  | $ | 1,748,174 |  |  | $ | 9,045,770 |  |  | $ | 6,569,227 |
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: ( 1 ) reducing the U.S. federal corporate tax rate from 35% to 21% ; ( 2 ) changing rules related to uses and limitations of net operating loss carry forwards created in tax years beginning after December 31, 2017; ( 3 ) bonus depreciation that will allow for full expensing of qualified property; ( 4 ) creating a new limitation on deductible interest expense; ( 5 ) eliminating the corporate alternative minimum tax; and ( 6 ) new tax rules related to foreign operations. We have calculated, as a provisional estimate, a net $5.8 mill ion non-cash tax benefit through income from continuing operations for the re-measurement impact related to the changes in tax laws included in the Tax Act. The primary driver of this re-measurement was the result of the reduction in the corporate tax rate from 35% to 21% which resulted in our recognizing, based on the rates at which they are expected to reverse in the future, a $10.0 million non-cash tax benefit through income from continuing operations for the re-measurement of our deferred tax assets and liabilities. This amount was partially offset by our recording a valuation allowance of $1.3 million related to prior year Foreign Tax Credits that we have determined are no longer more likely than not to be used as the tax rate in the jurisdiction where these Foreign Tax Credits is generated is higher than the 21% corporate tax rate. In addition, the impact of the prepaid registry fee deduction, more fully described below, together with the reduction in the tax rate to 21% make it unlikely we will be able to claim the fiscal 2017 foreign taxes paid in future years and as such opted to utilise the foreign taxes paid as a deduction for 2017 income tax purposes, the net negative effect of which is a $2.9 million addition to income tax expense. The provisional amount related to the one -time transition tax on the mandatory deemed repatriation of foreign earnings was less than $0.1 million. On December 22, 2017, the SEC issued guidance to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The completion of our 2017 income tax returns, future guidance and additional information and interpretations with the respect to the Tax Act may cause us to adjust the provisional amounts recorded as of December 31, 2017. In accordance with the SEC's guidance, we will record such adjustments as current tax expense in the period in which relevant guidance or additional information becomes available and our analysis is complete. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2017, and 2016 are presented below:
|  | December 31, 201 7 |  |  | December 31, 201 6 |
Deferred tax assets (liabilities) : |  |  |  |  |  |  |  |
Deferred tax assets : |  |  |  |  |  |  |  |
Deferred revenu e |  | $ | 7,573,276 |  |  | $ | 5,482,080 |
Foreign tax credit s |  |  | 1,275,937 |  |  |  | 1,275,937 |
Amortizatio n |  |  | (1,936,615 | ) |  |  | (2,184,944 | )
Net operating losse s |  |  | 2,544,862 |  |  |  | - |
Accruals, including foreign exchange and othe r |  |  | 517,493 |  |  |  | 1,135,652 |
Sub-total Deferred tax asset s |  |  | 9,974,953 |  |  |  | 5,708,725 |
Valuation allowance |  |  | (1,275,937 | ) |  |  | - |
Total deferred tax asset s |  | $ | 8,699,016 |  |  | $ | 5,708,725 |
Deferred tax liabilities : |  |  |  |  |  |  |  |  |
Prepaid registry fees and expense s |  | $ | (18,051,222 | ) |  | $ | - |
Limited life intangible asset s |  |  | (7,371,264 | ) |  |  | (120,232 | )
Indefinite life intangible asset s |  |  | (3,110,208 | ) |  |  | (4,706,960 | )
Total deferred tax liability |  | $ | (28,532,694 | ) |  | $ | (4,827,192 | )
Net deferred tax asset (liability ) |  | $ | (19,833,678 | ) |  | $ | 881,533 |
In connection with the eNom acquisition, we acquired deferred tax liabilities primarily composed of prepaid registry fees. As a result, we aligned our tax methodology pertaining to the deductibility of prepaid registry fees for our legacy domain services. 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. We believe it is more likely than not that our remaining deferred tax assets, net of the valuation allowance, will be realized based on current income tax laws, including those modified by the Tax Act, and expectations of future taxable income stemming from the reversal of existing deferred tax liabilities. The Company had approximately $15,000 of total gross unrecognized tax benefit as of December 31, 2017, and $0.1 million as of December 31, 2016, which if recognized would favorably affect its income tax rate in future periods. The remaining unrecognized tax benefit relates primarily to 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, 2017, and December 31, 2016. Unrecognized tax benefits decreased by $0.1 million as the tax authorities finalized their review and settled prior years’ taxes owing in Pennsylvania. The following is a reconciliation of Tucows ’ change in uncertain tax position:
Total Gross Unrecognized Tax Benefits |  | December 31, 201 7 |  |  | December 31, 201 6 |
Balance, beginning of year |  | $ | 117,000 |  |  | $ | 117,000 |
Change in uncertain tax benefits |  |  | (102,000 | ) |  |  | — |
Balance, end of year |  | $ | 15,000 |  |  | $ | 117,000 |

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration