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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
INCOME TAXES |
INCOME TAXES | NOTE 6-INCOME TAXES On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (TCJA). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the top U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the "Transition Tax"); (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. Under GAAP, we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Due to the reduction in our federal corporate tax rate from 34% to 21%, we revalued our net deferred tax assets and deferred tax liabilities and recorded a discrete tax expense of $169 thousand in 2017. The Transition Tax is a tax on previously untaxed accumulated and current earnings and profits of certain of our foreign subsidiaries. We were able to make a reasonable estimate of the Transition Tax and determined that it was insignificant. The Tax Act includes a new provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a 10.5% tax on certain income of controlled foreign corporations. We have elected to account for GILTI as a period cost if and when occurred, rather than recognizing deferred taxes for basis differences expected to reverse. As a result of this policy election, there is no impact to our 2017 deferred tax calculation. The remeasurement of the deferred tax assets and liabilities is included in our 2017 tax expense. However, the remeasured amounts incorporate assumptions made based upon the Company’s current interpretation of the TCJA. Our estimates of the impact of the Tax Act may change due to a number of additional considerations including, but not limited to, the issuance of additional regulations or guidance and our ongoing analysis of the new law. Any subsequent adjustment to these amounts will be recorded to tax expense in 2018 when the analysis is complete. The components of earnings before income tax provision (benefit) for the years ended December 31, 2017 and 2016 were as follows:
|  | Year Ended
|  | December 31,
|  | 2017 |  | 2016
|  | (in thousands)
Income (loss) before income tax provision (benefit): |  |  |  |  |  |
Domestic |  | $ | 1,071 |  | $ | 1,903
Foreign |  |  | 1,063 |  |  | 984
|  | $ | 2,134 |  | $ | 2,887
Income tax provision (benefit) consists of the following for the years ended December 31, 2017 and 2016:
|  | Year Ended
|  | December 31,
|  | 2017 |  | 2016
|  | (in thousands)
Income tax provision (benefit): |  |  |  |  |  |
Current |  |  |  |  |  |
Federal |  | $ | 360 |  | $ | 427
State |  |  | 69 |  |  | 11
Foreign |  |  | 263 |  |  | 231
Total current |  |  | 692 |  |  | 669
Deferred: |  |  |  |  |  |
Federal |  |  | 157 |  |  | (429)
State |  |  | 30 |  |  | (216)
Foreign |  |  | (5) |  |  | (30)
Total deferred |  |  | 182 |  |  | (675)
Total income tax provision (benefit) |  | $ | 874 |  | $ | (6)
A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to net income before income tax provision (benefit) is as follows:
|  | December 31, |
|  | 2017 |  |  | 2016 |
|  | $ |  | % |  |  | $ |  | % |
|  | (in thousands, except percentages) |
Federal income tax provision (benefit) at statutory rate |  | $ | 726 |  | 34.0 | % |  | $ | 982 |  | 34.0 | %
State tax expense net of federal tax benefit |  |  | 63 |  | 3.0 | % |  |  | 112 |  | 3.9 | %
Foreign taxes |  |  | (116) |  | (5.4) | % |  |  | (103) |  | (3.6) | %
Other |  |  | 27 |  | 1.3 | % |  |  | (8) |  | (0.3) | %
Change in statutory tax rate |  |  | 169 |  | 7.9 | % |  |  | — |  | 0.0 | %
Change in valuation allowance |  |  | 5 |  | 0.2 | % |  |  | (989) |  | (34.2) | %
Income tax provision (benefit) |  | $ | 874 |  | 41.0 | % |  | $ | (6) |  | (0.2) | %
Deferred tax assets and liabilities are recognized for future tax consequences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the fiscal year in which the difference are expected to reverse. Significant deferred tax assets and liabilities, consist of the following:
|  | December 31, |
|  | 2017 |  | 2016 |
|  | (in thousands) |
Deferred tax assets, net |  |  |  |  |  |  |
Net operating loss carryforward |  | $ | 287 |  | $ | 420 |
Credits |  |  | 5 |  |  | 6 |
Accruals |  |  | 13 |  |  | 17 |
Reserves |  |  | 22 |  |  | 8 |
Fixed assets and intangible property |  |  | 69 |  |  | 93 |
Stock compensation |  |  | 82 |  |  | 74 |
Other |  |  | 20 |  |  | 57 |
Total deferred tax assets |  |  | 498 |  |  | 675 |
Valuation allowance |  |  | (5) |  |  | — |
Net deferred tax assets |  | $ | 493 |  | $ | 675 |
Deferred taxes are recorded for the following Net Operating Losses (“NOLs”) that can be used in future tax years:
|  | December 31, |
|  | 2017 |  | 2016 |
|  | (in millions) |
Net operating losses |  |  |  |  |  |  |
Federal |  | $ | 0.9 |  | $ | 1.0 |
State |  |  | 0.9 |  |  | 1.0 |
Foreign |  |  | 0.2 |  |  | 0.1 |
|  | $ | 2.0 |  | $ | 2.1 |
The federal and state NOLs expire at various dates between 2017 through 2030. Foreign NOLs are related to the jurisdictions of Singapore and Hong Kong and may be carried forward indefinitely. The Company experienced an ownership change under IRC Section 382 in February 2010. In general, a Section 382 ownership change occurs if there is a cumulative change in our ownership by “5% shareholders” (as defined in the Internal Revenue Code of 1986, as amended) that exceeds 50 percentage points over a rolling three-year period. An ownership change generally affects the rate at which NOLs and potential other deferred tax assets are permitted to offset future taxable income. Certain state jurisdictions within which we operate contain similar provisions and limitations. All of the remaining federal and state NOLs amount as of December 31, 2017 are subject to annual limitations due to the February 2010 ownership change, at approximately $71,000 per year. Because these limitations preclude the use of a large portion of these NOLs, the Company permanently wrote-off the related deferred tax assets during the year ended December 31, 2015. Because the Company maintained a full valuation allowance against these deferred tax assets, this write-off had no impact on tax expense. At December 31, 2017, the gross NOLs without regard to this permanent write-off is $48.5 million for federal and $17.5 million for state. A roll-forward of the NOLs for which deferred tax assets are now recorded is as follows:
|  | December 31,
|  | 2017 |  | 2016
|  | (in millions)
Net operating losses |  |  |  |  |  |
Balance at January 1, |  | $ | 2.1 |  | $ | 4.2
NOL generated (utilized) |  |  | (0.1) |  |  | (2.2)
NOL expired unused |  |  | — |  |  | —
Other, including changes in foreign exchange rates |  |  | — |  |  | 0.1
Balance at December 31, |  | $ | 2.0 |  | $ | 2.1
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. We analyzed our need to maintain the valuation allowance against our otherwise recognizable deferred tax assets in the federal, state and foreign jurisdictions and had previously recorded a total valuation allowance of $989 thousand as of December 31, 2015. During the fourth quarter of 2016, we determined, given our current earnings and anticipated future earnings, that sufficient evidence existed to reach a conclusion that the valuation allowance against our NOL was no longer warranted. As of December 31, 2017, withholding and U.S. taxes had not been provided on approximately $700 thousand of unremitted earnings of non-U.S. subsidiaries because the Company has currently reinvested these earnings permanently in such operations. Such earnings would be taxable upon the sale or liquidation of these subsidiaries or upon remittance of dividends. Although such earnings are intended to be reinvested indefinitely, any tax liability for undistributed earnings, including withholding taxes, would be partially negated by the availability of corresponding foreign tax credits. As of December 31, 2015, there were no unremitted earnings of non-U.S. subsidiaries due to historical losses in those entities. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns after 2013 remain open to examination. We and our subsidiaries are also subject to income tax in multiple state and foreign jurisdictions. Generally, state and foreign income tax returns after 2012 remain open to examination. No income tax returns are currently under examination. As of December 31, 2017 and 2016, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2017 and 2016, there were no penalties or interest recorded in income tax expense.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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