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Note 15 - Income Taxes
 12 Months Ended
Dec. 28, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

15.   INCOME TAXES

 

Generally, the Company’s relative income or loss generated in each of its jurisdictions can materially impact the consolidated effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income, versus United States pretax income. The consolidated effective income tax rate for fiscal years ended December 28, 2024 and December 30, 2023 were 34.0% and 24.2%, respectively.  The Company’s United States Federal statutory tax rate for fiscal years ended December 28, 2024 and December 30, 2023, before any adjustments, was 21.0%.  The income tax provisions reconciled to the tax computed at the United States Federal statutory rate for fiscal years 2024 and 2023 are as follows:

 

  

December 28,

2024

  

December 30,

2023

 
  

Amount

  

% of Earnings

Before Taxes

  

Amount

  

% of Earnings

Before Taxes

 

Tax expense on taxable

income at federal statutory rate

 $4,240   21.0  $4,661   21.0 

State and Puerto Rico income taxes,

net of Federal income tax benefit

  1,164   5.8   1,082   4.9 

Permanent differences domestic and foreign

  188   0.9   (269)  (1.2)
Intangible asset deferred liability true-up  797   4.0   -   - 

Foreign income tax rates

  108   0.5   25   0.1 
Foreign tax adjustment  174   0.9   -   - 

Other

  191   0.9   (135)  (0.6)

Total income tax expense

 $6,863   34.0  $5,364   24.2 

 

 

 

The components of income tax expense (benefit) are as follows:

 

  

Fiscal Years Ended

 
  

December 28,

2024

  

December 30,

2023

 

Current

        

Federal

 $2,609  $3,055 

State and local

  611   1,608 

Foreign

  942   660 
   4,162   5,323 
         

Deferred

        

Federal

  2,343   217 

State

  611   (143)

Foreign

  (253)  (33)
   2,701   41 

Total

 $6,863  $5,364 

 

 

The components of earnings before income taxes by United States and foreign jurisdictions were as follows:

 

  

Fiscal Years Ended

 
  

December 28,

2024

  

December 30,

2023

 

United States and Puerto Rico

 $16,607  $19,333 

Foreign jurisdictions

  3,583   2,862 
  $20,190  $22,195 

 

 

A reconciliation of the unrecognized tax benefits for the years December 28, 2024 and December 30, 2023:

 

Unrecognized Tax Benefits

    

Balance as of December 31, 2022

 $1,196 

Gross increases: tax positions in prior period

  - 

Gross increases: tax positions in current period

  - 

Balance as of December 30, 2023

 $1,196 

Gross increases: tax positions in prior period

  - 

Gross increases: tax positions in current period

  - 
     

Balance as of December 28, 2024

 $1,196 

 

 

 

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will not change during the next 12 months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future.

 

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to tax expense.  The Company recorded no expense for penalties or interest in the fiscal years ended December 28, 2024 and December 30, 2023.

 

At December 28, 2024 and December 30, 2023, deferred tax assets and liabilities consist of the following:

 

  

December 28,

2024

  

December 30,

2023

 

Deferred tax assets:

        

Provision for credit losses

 $400  $421 

Federal and state net operating loss carryforward

  41   48 

Compensation

  836   747 

Reserves, accruals, and other

  461   760 

Lease liability

  1,304   777 

Net operating loss carryforward, Germany

  120   55 

Total deferred tax assets

  3,162   2,808 
         

Deferred tax liabilities:

        

Intangible assets, net of amortization

  (4,272)  (1,860)

Prepaid expense deferral

  (1,146)  (1,044)

Fixed assets, net of depreciation

  (906)  (689)

Right of use assets

  (1,244)  (728)

Deferred tax liability, net, Canada

  -   (187)

Total deferred tax liabilities

  (7,568)  (4,508)

Total deferred tax (liabilities) assets, net

 $(4,406) $(1,700)

 

The Company has gross state net operating losses of $0.6 million and foreign net operating losses of $0.4 million to be applied to the net income of future tax returns, respectively.  The state net operating losses are subject to various expiration periods.  The foreign net operating losses have an indefinite carryforward period.

 

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, Philippines, Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company has no open Federal audits as of December 28, 2024. Except for limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2020. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2020. The Company is under audit in Canada for tax years 2021 and 2022. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2019.

 

Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, and share-based compensation. The actual 2024 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, and the exercise of stock options and vesting of share-based awards.

 

 

Under APB 23, foreign earnings are generally not subject to U.S. tax until repatriated or deemed repatriated under the anti-deferral rules.  The Company has determined that as of December 28, 2024, all current and future earnings in its foreign subsidiaries will be permanently reinvested.   Based on this determination, the anti-deferral rules have no material impact on the Company.