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INCOME TAXES | 12 Months Ended
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Dec. 28, 2019
Income Taxes [Abstract] |
INCOME TAXES | 8. I ncome T axes Deferred income taxes are provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for income tax reporting purposes. Deferred income tax (assets) liabilities relate to:
|  | 2019 |  |  | 2018 |
Property, plant and equipment |  | $ | 4,638,141 |  |  | $ | 2,582,792 |
Right of Use Asset |  |  | 2,933,189 |  |  |  | -- |
Intangible assets |  |  | 9,236,711 |  |  |  | 4,710,052 |
Other |  |  | 380,336 |  |  |  | 218,710 |
Foreign Withholding Tax |  |  | 315,747 |  |  |  | 540,761 |
Total deferred income tax liabilities |  |  | 17,504,124 |  |  |  | 8,052,315 |
Other postretirement benefits |  |  | (239,348 | ) |  |  | (156,710 | )
Inventories |  |  | (1,422,472 | ) |  |  | (1,133,427 | )
Allowance for doubtful accounts |  |  | (123,172 | ) |  |  | (146,576 | )
Accrued compensation |  |  | (311,125 | ) |  |  | (200,232 | )
Lease Obligation |  |  | (2,933,189 | ) |  |  | -- |
Pensions |  |  | (6,804,275 | ) |  |  | (6,127,538 | )
Foreign Tax Credit |  |  | (400,078 | ) |  |  | (167,826 | )
Total deferred income tax assets |  |  | (12,233,659 | ) |  |  | (7,932,309 | )
Net deferred income tax (assets) liabilities |  | $ | 5,270,465 |  |  | $ | 120,006 |
Income before income taxes consists of:
|  | 2019 |  |  | 2018 |
Domestic |  | $ | 12,537,168 |  |  | $ | 12,431,889 |
Foreign |  |  | 3,668,803 |  |  |  | 5,158,440 |
|  | $ | 16,205,971 |  |  | $ | 17,590,329 |
The provision for income taxes follows:
|  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |
Federal |  | $ | 2,783,481 |  |  | $ | 484,451 |
Foreign |  |  | 1,001,270 |  |  |  | 753,521 |
State |  |  | 489,921 |  |  |  | 347,199 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (756,206 | ) |  |  | 815,858 |
Foreign |  |  | (225,014 | ) |  |  | 153,726 |
State |  |  | (353,623 | ) |  |  | 529,637 |
|  | $ | 2,939,829 |  |  | $ | 3,084,392 |
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
|  | 2019 |  |  | 2018 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
Income taxes using U.S. federal statutory rate |  | $ | 3,403,254 |  |  |  | 21 | % |  | $ | 3,693,968 |  |  |  | 21 | %
State income taxes, net of federal benefit |  |  | 117,276 |  |  |  | 1 |  |  |  | 692,698 |  |  |  | 4 |
Impact on Foreign Repatriation Tax Reform |  |  | -- |  |  |  | 0 |  |  |  | (83,479 | ) |  |  | (1 | )
Impact of foreign subsidiaries on effective tax rate |  |  | (239,823 | ) |  |  | (2 | ) |  |  | (401,992 | ) |  |  | (2 | )
Impact of New Tax Law |  |  | -- |  |  |  | 0 |  |  |  | (507,847 | ) |  |  | (2 | )
Impact of Research & Development tax credit |  |  | (411,090 | ) |  |  | (3 | ) |  |  | (216,675 | ) |  |  | (1 | )
Impact of manufacturers deduction on effective tax rate |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Other—net |  |  | 70,212 |  |  |  | 1 |  |  |  | (92,281 | ) |  |  | (1 | )
|  |  | 2,939,829 |  |  |  | 18 | % |  |  | 3,084,392 |  |  |  | 18 | %
Total income taxes paid were $3,197,984 in 2019 and $3,741,021 in 2018. Pursuant to the SAB118, the company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts and as such has adjusted for the finalization of the tax impacts in the fourth quarter of 2018. The change primarily related to deferred taxes. Under accounting standards (ASC 740) a deferred tax liability is not recorded for the excess of the financial reporting (book) basis over the tax basis of an investment in a foreign subsidiary if the indefinite reinvestment criteria is met. Effective for foreign earnings after December 30, 2017, if such earnings are distributed in the form of cash dividends, the Company would not be subject to additional U.S. income taxes but could be subject to foreign income and withholding taxes. A provision has not been made for additional U.S. federal and foreign taxes at December 28, 2019 on approximately $7,460,584 of undistributed earnings of foreign subsidiaries because the Company intends to reinvest these funds indefinitely. It is not practicable to estimate the unrecognized deferred tax liability for withholding taxes on these undistributed earnings. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive. The changes include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses and exceptions to deferred tax liability recognition related to foreign subsidiary investments. In addition, ASU 2019-12 requires that entities recognize franchise tax based on an incremental method, requires an entity to evaluate the accounting for step-ups in the tax basis of Goodwill as inside or outside of a business combination, and removes the requirement to allocate the current and deferred tax provision among entities in standalone financial statement reporting. The ASU also now requires that an entity reflect enacted changes in tax laws in the annual effective rate, and other Codification adjustments have been made to employee stock ownership plans. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating whether to early adopt ASU 2019-12 in the first interim period of 2020. A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:
|  | 2019 |  |  | 2018 |
Balance at beginning of year |  | $ | 299,722 |  |  | $ | 299,734 |
Increases for positions taken during the current period |  |  | 137,927 |  |  |  | 0 |
Increases for positions taken during the prior period |  |  | 2,039,117 |  |  |  | 74,219 |
Decreases resulting from the expiration of the statute of limitations |  |  | (69,384 | ) |  |  | (74,231 | )
Balance at end of year |  | $ | 2,407,382 |  |  | $ | 299,722 |
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2015 and non-U.S. income tax examinations by tax authorities prior to 2013. Included in the balance at December 28, 2019, are $1,640,609 of unrecognized tax benefits that would affect the annual effective tax rate. In 2019, the Company recognized accrued interest related to unrecognized tax benefits in income tax expense. The Company had approximately $57,879 of accrued interest at December 28, 2019. The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under ASC 740. The Company believes that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.

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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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