9.	INCOME TAXES

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but

not

limited to, (

) reducing the U.S. federal corporate tax rate from

percent to

percent; (

) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (

) changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after

December 31, 2017; (

) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after

December 31, 2017;

and (

) implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries.

The Tax Act provided for a

one

-time deemed mandatory repatriation for post-

1986

undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended

December 31, 2017.

The Company had a deficit in foreign E&P and is

not

expected to be subject to the deemed mandatory repatriation.

December 22, 2017,

the SEC staff issued Staff Accounting Bulletin

No.

118

to address the application of U.S. GAAP in situations when a registrant does

not

have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. At

April 1, 2018,

the amounts recorded for the Tax Act remain provisional for the transition tax, the remeasurement of deferred taxes, and our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances. These estimates

may

be impacted by further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, state tax conformity to federal tax changes and the impact of the GILTI provisions. At

April 2018,

we were

not

able to reasonably estimate, and therefore have

not

recorded, deferred taxes for the GILTI provisions. We have

not

yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method.

For the

three

-month periods ended

April 1, 2018

and

April 2, 2017,

we recognized

$55

and

$87,

respectively, in income tax expense. These are detailed as follows:

	Three-Month Periods E nded
	April 1 ,			April 2 ,
	2018			2017
Current Income Tax Provision:
Foreign	$	52		$	21
Federal		-			22
State		4			5
Deferred Income Tax (Benefit) Provision		(1	)		39
Total	$	55		$	87

The deferred income tax benefit for

2018

represents the amortization of certain intangible assets of Accutronics (U.K.) largely offset by the increase in the taxable temporary difference related to goodwill and certain other indefinite-lived intangible assets of the U.S. operations that cannot be predicted to reverse for book purposes during our loss carryforward periods. The deferred income tax provision for

2017

reflects the higher previously-enacted U.S corporate tax rate. The current income tax provisions for

2018

and

2017

are primarily due to the income generated by our foreign operations during the respective periods.

Our effective consolidated tax rates for the

three

-month periods ended

April 1, 2018

and

April 2, 2017

were:

	Three-Month P erio ds E nded
	April 1,			April 2 ,
	2018			2017

Income Before Income Taxes	$	2,223		$	1,748

Income Tax Provision		55			87

Effective Income Tax Rate		2.5	%		5.0	%

2018

and

2017,

in the U.S. and for certain past operations in the U.K., we recognize a valuation allowance for our net operating loss carryforwards and other deferred tax assets that cannot be offset by reversing temporary differences. The recognition of the valuation allowance is based on an assessment of all available evidence, both positive and negative, weighted based on objective verifiability. The assessment of the realizability of the U.S. deferred tax assets was based on a number of factors including our history of operating losses, our historical operating volatility, our historical inability to accurately forecast earnings for future periods and the continued uncertainty of the general business climate. The use of our U.K. net operating loss carryforwards

may

be limited due to the change in the past U.K. operation. Based on our assessment of all available evidence and its weighting based on objective verifiability, we concluded that the realizability of these deferred tax assets is

not

more likely than

not.

In both

2018

and

2017,

we have

not

recognized a valuation allowance against our other foreign deferred tax assets as we believe that it is more likely than

not

that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods.

As of

December 31, 2017,

we have domestic and foreign net operating losses (“NOL”) totaling approximately

$69,594

and

$12,760,

respectively, and domestic tax credits of approximately

$1,837,

available to reduce future taxable income. Included in our NOL carryforwards are foreign loss carryforwards of approximately

$12,760,

nearly all of which can be carried forward indefinitely. The domestic NOL carryforward of

$69,594

expires beginning in

2019

through

2034.

As of

April 1, 2018,

the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations.

There were

unrecognized tax benefits related to uncertain tax positions at

April 1, 2018

and

December 31, 2017.

As a result of our operations, 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

2002

through

2017

remain subject to examination by the Internal Revenue Service (“IRS”) and various state and local tax jurisdictions due to our NOL carryforwards. Our tax matters for the years

2009

through

2017

remain subject to examination by the respective foreign tax jurisdiction authorities.