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Note 16 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 16. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. This legislation made significant changes to the U.S. tax law, including a reduction in the corporate tax rate from 35% to 21% starting in 2018. In accordance with Staff Accounting Bulletin No. 118, which provides guidance on accounting for the tax effects of the 2017 Tax Act, the Company has recorded the impact on the consolidated financial statements. There were no significant changes in the provisional amount recorded in 2017 related to the finalization of the Company’s analysis. The other provisions of the Tax Act did not have a material impact on the 2017 consolidated financial statements. Income Tax Expense The components of the Company’s income before income taxes and its provision for (benefit from) income taxes consist of the following:
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
Income before income taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 38,299 |  |  | $ | 26,227 |  |  | $ | 48,446 |
Foreign |  |  | (2,178 | ) |  |  | (3,020 | ) |  |  | (2,244 | )
|  | $ | 36,121 |  |  | $ | 23,207 |  |  | $ | 46,202 |
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
Provision for (benefit from) income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 6,245 |  |  | $ | 4,783 |  |  | $ | 12,608 |
State |  |  | 1,884 |  |  |  | 1,644 |  |  |  | 2,737 |
Foreign |  |  | 202 |  |  |  | 405 |  |  |  | 31 |
Total current |  |  | 8,331 |  |  |  | 6,832 |  |  |  | 15,376 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 1,086 |  |  |  | (992 | ) |  |  | (426 | )
State |  |  | 324 |  |  |  | (152 | ) |  |  | (68 | )
Foreign |  |  | (813 | ) |  |  | (1,203 | ) |  |  | (496 | )
Total deferred |  |  | 597 |  |  |  | (2,347 | ) |  |  | (990 | )
Total provision |  | $ | 8,928 |  |  | $ | 4,485 |  |  | $ | 14,386 |
Deferred Tax Assets and Liabilities Significant components of the Company’s deferred tax assets and liabilities consist of the following:
|  | December 31,
|  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carry forward, foreign |  | $ | 1,812 |  |  | $ | 1,382 |
Stock-based compensation expense |  |  | 1,901 |  |  |  | 3,148 |
Foreign currency exchange |  |  | 346 |  |  |  | 363 |
Accrued expenses and other |  |  | 1,076 |  |  |  | 818 |
Inventory reserve |  |  | 1,187 |  |  |  | 1,500 |
Lease liability |  |  | 5,206 |  |  |  | – |
Deferred tax assets |  | $ | 11,528 |  |  | $ | 7,211 |
|  | December 31,
|  | 2019 |  | 2018
Deferred tax liabilities: |  |  |  |  |  |  |  |
Acquisition-related Intangibles |  | $ | (2,023 | ) |  | $ | (2,405 | )
Depreciation |  |  | (8,665 | ) |  |  | (8,348 | )
Right of use asset |  |  | (5,171 | ) |  |  | – |
Deferred tax liabilities |  | $ | (15,859 | ) |  | $ | (10,753 | )
Net deferred tax liabilities |  | $ | (4,331 | ) |  | $ | (3,542 | )
Tax Rate The reconciliation between the U.S. federal statutory rate and the Company’s effective rate is summarized as follows:
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
Statutory federal income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
State tax expense, net of federal benefit |  |  | 5.5 | % |  |  | 5.5 | % |  |  | 4.8 | %
Impact of rate change on deferred taxes |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (4.9 | %)
Permanent items, including nondeductible expenses |  |  | (0.1 | %) |  |  | (1.4 | %) |  |  | 0.1 | %
State investment tax credit |  |  | (0.1 | %) |  |  | (0.2 | %) |  |  | (0.7 | %)
Federal, state and foreign research and development credits |  |  | (1.4 | %) |  |  | (3.4 | %) |  |  | (1.4 | %)
Foreign rate differential |  |  | (0.2 | %) |  |  | (0.4 | %) |  |  | 0.5 | %
Domestic production deduction |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (2.8 | %)
Stock compensation |  |  | 0.6 | % |  |  | (4.8 | %) |  |  | (0.2 | %)
Non-deductible Section 162(m) compensation limitation |  |  | 0.3 | % |  |  | 4.3 | % |  |  | 0.7 | %
Foreign derived intangible income deduction |  |  | (0.9 | %) |  |  | (1.3 | %) |  |  | 0.0 | %
Effective income tax rate |  |  | 24.7 | % |  |  | 19.3 | % |  |  | 31.1 | %
As of December 31, 2019, the Company had net operating loss carryforwards for income tax purposes in Italy of $7.5 million that do not expire. Accounting for Uncertainty in Income Taxes The Company had no unrecognized tax benefits for the years ended December 31, 2019 and 2018, respectively. The Company does not anticipate experiencing any significant increases or decreases in its unrecognized tax benefits within the twelve months following December 31, 2019. In the normal course of business, Anika and its subsidiaries may be periodically examined by various taxing authorities. The Company files income tax returns in the U.S. federal jurisdiction, in certain U.S. states, and in Italy. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The 2016 through 2018 tax years remain subject to examination by the IRS and other taxing authorities for U.S. federal and state tax purposes. The 2013 through 2018 tax years remain subject to examination by the appropriate governmental authorities for Italy. Upon the settlement of certain stock-based awards (i.e., exercise, vesting, forfeiture, or cancellation), the actual tax deduction is compared with cumulative financial reporting compensation cost, and any excess tax deduction related to these awards is considered a windfall tax benefit. With the adoption of ASU 2016 - 09 in 2017, the Company records windfall tax benefits to income tax expense. The Company follows the with-and-without approach for the direct effects of windfall/shortfall items and to determine the timing of the recognition of any related benefits. The Company recorded an immaterial windfall tax benefit in income tax expense in 2019 compared to $1.5 million and $0.4 million in 2018 and 2017, respectively.

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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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