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Note 9 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
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 21% for the year ended December 31, 2018 and 35% for the years ended December 31, 2017 and December 31, 2016, to income before provision for income taxes as a result of the following (Dollar amounts in thousands of U.S. dollars):
|  | Year ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Income for the year before provision for income taxes |  | $ | 26,155 |  |  | $ | 24,075 |  |  | $ | 25,113 |
Computed tax expense |  |  | 5,492 |  |  |  | 8,185 |  |  |  | 8,538 |
Increase (reduction) in income tax expense resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes |  |  | 846 |  |  |  | 657 |  |  |  | 532 |
Effect of the decrease in Federal tax rate on deferred taxes |  |  | - |  |  |  | (10,036 | ) |  |  | - |
Change in Valuation allowance |  |  | 2,811 |  |  |  | 1,276 |  |  |  | - |
Non-creditable Foreign Tax |  |  | - |  |  |  | 2,903 |  |  |  | - |
Excess tax benefits on share-based compensation expense |  |  | (697 | ) |  |  | (2,796 | ) |  |  | - |
Permanent differences |  |  | 159 |  |  |  | 1,636 |  |  |  | 290 |
Others |  |  | 409 |  |  |  | (77 | ) |  |  | (314 | )
Provision for income taxes |  | $ | 9,020 |  |  | $ | 1,748 |  |  | $ | 9,046 |
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 allows 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. In Fiscal 2018, the Company was able to utilize the bonus depreciation with respect to its continued investment in the Ting Internet business. The impact of this, together with the reduction in tax rate to 21%, make it unlikely we will ultimately be able to fully claim the Fiscal 2018 foreign taxes paid in future years. In addition, the Company generated net operating losses of $0.2 million which it does not expect to be able to utilize in the future. As such, we have taken a valuation allowance on foreign tax credits not utilized for 2018 income tax purposes and net operating losses not expected to be utilized in the future, the net negative effect of which is a $2.8 million addition to income tax expense. In Fiscal 2017, we reflected a net $5.8 million 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 were 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% made it unlikely we would 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 was a $2.9 million addition to income tax expense. 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 resulted in insignificant adjustments related to provisional impact estimates from Fiscal 2017. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2018, and 2017 are presented below (Dollar amounts in thousands of U.S. dollars):
|  | December 31, 2018 |  |  | December 31, 2017 |
Deferred tax assets (liabilities): |  |  |  |  |  |  |  |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred revenue |  | $ | 6,497 |  |  | $ | 7,573 |
Foreign tax credits |  |  | 3,865 |  |  |  | 1,276 |
Amortization |  |  | (5,872 | ) |  |  | (1,937 | )
Net operating losses |  |  | 1,892 |  |  |  | 2,545 |
Accruals, including foreign exchange and other |  |  | 1,955 |  |  |  | 517 |
Sub-total Deferred tax assets |  |  | 8,337 |  |  |  | 9,974 |
Valuation allowance |  |  | (4,087 | ) |  |  | (1,276 | )
Total deferred tax assets |  | $ | 4,250 |  |  | $ | 8,698 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid registry fees and expenses |  | $ | (15,950 | ) |  | $ | (18,051 | )
Limited life intangible assets |  |  | (6,115 | ) |  |  | (7,371 | )
Indefinite life intangible assets |  |  | (3,110 | ) |  |  | (3,110 | )
Total deferred tax liability |  | $ | (25,175 | ) |  | $ | (28,532 | )
Net deferred tax asset (liability) |  | $ | (20,925 | ) |  | $ | (19,834 | )
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 forecasted profits from ongoing operations and from the reversal of existing deferred tax liabilities. The Company had nil total gross unrecognized tax benefit as of December 31, 2018, and $15 (in thousands of U.S. dollars) as of December 31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. The Company did not have any interest and penalties accrued as of December 31, 2018, and December 31, 2017. The following is a reconciliation of Tucows’ change in uncertain tax position (Dollar amounts in thousands of U.S. dollars):
Total Gross Unrecognized Tax Benefits |  | December 31, 2018 |  |  | December 31, 2017 |
Balance, beginning of year |  | $ | 15 |  |  | $ | 117 |
Change in uncertain tax benefits |  |  | (15 | ) |  |  | (102 | )
Balance, end of year |  | $ | - |  |  | $ | 15 |
In Fiscal 2017, 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 other subsidiaries. In Fiscal 2018, we determined that we were in technical violation with respect to the administrative application of the accounting method change relating to the deductibility of prepaid registry fees for these additional subsidiaries. Based on the Company’s examination of administrative practices and precedents by the IRS, we believe that on a more likely than not basis that our tax position will be sustained. If the position is not sustained, then the accounting method change would be deferred into the following taxation period and we may be subject to incremental taxes as well as interest and penalties.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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