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Note 8 - Income Taxes
 6 Months Ended
Jun. 30, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

8. Income Taxes:

 

The Company's provision for income taxes for interim periods is determined by using an estimated annual effective tax rate, adjusted for discrete items arising during the quarter. At each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to volatility due to several factors, including accurately forecasting the Company's net income before tax and taxable income or loss and the mix of tax jurisdictions to which they relate, intercompany transactions, and changes in statutes, regulations, and case law.

 

For the three and six months ended June 30, 2022, the Company recorded an income tax expense of$0.7 million and $1.8 million respectively, on net loss before income taxes of $2.4 million and $4.3 million respectively, using an estimated effective tax rate for the fiscal year ending December 31, 2022.  Our effective tax rates for the three and six months ended June 30, 2022 differ from the U.S. federal statutory rate primarily due to changes in valuation allowance on foreign tax credit, state tax expense and the impact of foreign earnings.

 

Comparatively, for the three months ended June 30, 2021, the Company recorded an income tax recovery of $0.1 million on net income before income taxes of $1.7 million, using an estimated effective tax rate for the fiscal year ending December 31, 2021 (“Fiscal 2021”).  Our income tax recovery includes a $0.5 million tax recovery related to discrete adjustments resulting from foreign exchange and mark-to-market adjustments as well as the inclusion of a $0.4 million tax recovery related to ASU No. 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which requires all excess tax benefits and tax deficiencies related to employee share-based payments to be recognized through income tax expense (recovery).

 

Comparatively, for the six months ended June 30, 2021, the Company recorded an income tax expense of $1.0 million on income before income taxes of $4.9 million, using an estimated effective tax rate for Fiscal 2021.  Our income tax expense includes a $0.8 million tax recovery related to discrete adjustments resulting from foreign exchange and mark-to-market adjustments as well as the inclusion of a $0.2 million tax recovery related to ASU No. 2016-09. 

 

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.