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Note 9 - Income Taxes
 3 Months Ended
Mar. 29, 2015
Note 9 - Income Taxes  
Income Taxes

9.INCOME TAXES

 

The asset and liability method, prescribed by FASB’s guidance on the accounting for income taxes, is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

 

For the three-month periods ended March 29, 2015 and March 30, 2014, we recorded $111 and $60, respectively, in income tax expense, detailed as follows:

 

   Three month periods ended
   March 29,  March 30,
   2015  2014
Current income tax provision:          
   Foreign  $52   $—   
   Federal          
  State   4    5 
Deferred income tax provision   55    55 
     Total  $111   $60 

 

Deferred income tax provision is primarily due to the recognition of deferred tax liabilities relating to goodwill and certain intangible assets that cannot be predicted to reverse for book purposes during our loss carryforward periods.

 

Our effective consolidated tax rates for the three-month periods ended March 29, 2015 and March 30, 2014 were:

 

   Three month periods ended
   March 29,  March 30,
   2015  2014
Income (loss) from continuing operations before          
   income taxes (a)  $634   $(1,159)
           
Income tax provision (b)   111    60 
           
Effective income tax rate (b/a)   17.5%   (5.2)%

 

The overall effective tax rate is the result of the combination of income and losses in each of our tax jurisdictions, which is particularly influenced by the fact that we have recorded a full reserve against our deferred tax assets pertaining to cumulative historical losses for our U.S. operations and our U.K. subsidiary, as management does not believe, at this time, that it is more likely than not that we will realize the benefit of these losses.

 

As of March 29, 2015, we have foreign and domestic net operating loss (“NOL”) and credit carryforwards totaling approximately $65,600 and $1,400 available to reduce future taxable income. Included in our NOL carryforwards are foreign loss carryforwards of approximately $12,400 that can be carried forward indefinitely. The domestic NOL carryforward of $53,200 expires from 2019 through 2035. The domestic NOL carryforward includes approximately $2,900 for which a benefit will be recorded in capital in excess of par value when realized.

 

Our unrecognized tax benefits related to uncertain tax positions at March 29, 2015 relate to Federal and various state jurisdictions. The following table summarizes the activity related to our unrecognized tax benefits:

 

   Three month periods ended
   March 29,  March 30,
   2015  2014
Balance – beginning of period  $7,296   $7,296 
Increases related to current year tax positions   —      —   
Increases related to prior year tax positions   —      —   
Decreases related to prior year tax positions   —      —   
Expiration of statute of limitations for assessment of taxes   —      —   
Settlements   —      —   
Balance – end of period  $7,296   $7,296 

 

The unrecognized tax benefits balance has been recorded as a decrease in the deferred tax asset relating to our NOL carryforward. Because we have recorded a full valuation allowance against our deferred tax assets, the unrecognized tax benefits balance has no effect on our net income (loss) or financial position, as presented. Interest and penalties would begin to accrue in the period in which the NOL carryforwards related to the uncertain tax positions are utilized. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

 

We file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for the years 2000 through 2014 remain subject to examination by the Internal Revenue Service (“IRS”) and by various state and local tax jurisdictions due to our NOL carryforwards. Our tax matters for the years 2007 through 2014 remain subject to examination by the respective foreign tax jurisdiction authorities. The IRS has completed the examination of our 2009 U.S. federal income tax return, with no resulting material effect to our financial position or results of operations, and is examining our U.S. federal income tax returns for 2011 through 2013.