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Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2024
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 years ended  December 31, 2024,  December 31, 2023 and  December 31, 2022, 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,

 
  

2024

  

2023

  

2022

 
             

Income (loss) for the year before provision for income taxes

 $(101,874) $(103,070) $(27,788)

Computed federal tax expense (recovery)

  (21,394)  (21,644)  (5,836)
             

Increase (decrease) in income tax expense resulting from:

            

State income taxes

  (2,804)  (2,891)  845 

Foreign earnings

  5,039   5,976   386 

Changes in valuation allowance

  22,886   11,213   4,023 

Foreign income tax deduction

  (1,302)  (1,571)  - 

Adjustments recognized in the current period for income tax of prior periods

  4,819   1,569   250 

Permanent differences

  (87)  (90)  (112)

Shortfall (excess) tax benefits on share-based compensation

  -   -   138 

Others

  829   565   89 

Provision (recovery) for income taxes

 $7,986  $(6,873) $(217)

 

Our effective tax rate is mainly driven by changes in valuation allowance on net operating losses, interest expense limitation that we are not expected to realize in future years, and the impact of foreign earnings.

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2024, and  December 31, 2023 are presented below (Dollar amounts in thousands of U.S. dollars):

 

  

December 31, 2024

  

December 31, 2023

 

Deferred tax assets:

        

Net operating losses

 $71,429  $55,574 

Foreign tax credits

  12,534   13,040 

Share based compensation

  6,093   4,976 

Contract liabilities

  5,086   5,132 

Interest expense limitation

  4,417   4,606 

Limited life intangible assets

  

629

   

2,034

 

Accruals, including foreign exchange and other

  1,442   146 

Total deferred tax assets

  101,630   85,508 

Valuation allowance

  (51,653)  (28,767)

Total deferred tax assets

 $49,977  $56,741 

Deferred tax liabilities:

        

Investment in partnership

 $(27,130) $(32,550)

Prepaid registry fees and expenses

  (20,640)  (19,216)

Indefinite life intangible assets

  (2,965)  (2,966)

Fixed assets

  (2,205)  (4,862)

Foreign branch deferred tax liabilities

  -   (113)

Total deferred tax liabilities

 $(52,940) $(59,707)
         

Net deferred tax liabilities

 $(2,963) $(2,966)

 

In assessing the need for a valuation allowance, historical and future levels of income, expectations and risks associated with estimates of future taxable income and tax planning strategies are considered. In 2024, we have determined that it is not more likely than not that we will ultimately be able to fully utilize the net operating losses, foreign tax credits and interest expense limitation in future years. As of December 31, 2024, a valuation allowance of $51.7 million is recorded against net deferred tax assets. The increase in the valuation allowance was primarily attributable to an increase in deferred tax assets resulting from the loss from operations. 

 

As of December 31, 2024, the Company had net federal and state operating loss carryforwards of approximately $295.7 million and interest expense carryforwards of $18.1 million respectively. The majority of the net operating loss and interest expense carryforwards can be carried forward indefinitely.

 

As of December 31, 2024, the Company had foreign tax credit carryforwards of $12.5 million. The foreign tax credit will expire beginning in the year ending December 31, 2027 if not utilized.

 

The Company had nil total gross unrecognized tax benefits as of both December 31, 2024 and December 31, 2023. The Company does not expect its total gross unrecognized tax benefits will change within the next 12 months.

 

The Company recognizes interest and penalties related to income tax matters within the provision for income taxes. As of December 31, 2024, the Company recorded $0.7 million of interest in income taxes, primarily due to Sec. 453A interest on deferred tax liability for U.S. tax purposes. No other material interest and penalties were recognized as of December 31, 2024.