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Note 7 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 7 - Income Taxes

 

For the years ended December 31, 2021 and 2020, we recognized income tax expense of $79 and $1,692, respectively.

 

  

Year ended December 31,

 
  

2021

  

2020

 

Current:

        

State

 $16  $23 

Foreign

  210   283 
   226   306 

Deferred:

        

Federal

  (158)  1,673 

Foreign

  11   (287)
   (147)  1,386 

Total income tax provision

 $79  $1,692 

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

 

  

December 31,

 
  

2021

  

2020

 

Deferred tax assets:

        

Net operating loss carryforwards

 $12,567  $12,481 

Tax credit carryforwards

  2,239   2,070 

Intangible assets

  1,412   1,352 

Accrued expenses, reserves and other

  1,996   2,176 

Research and development

  1,999   984 

Total deferred tax assets

  20,213   19,063 

Valuation allowance for deferred tax assets

  (2,697)  (1,942)

Net deferred tax assets

  17,516   17,121 
         

Deferred tax liabilities:

        

Property, plant and equipment

  (79)  (262)

Intangible assets

  (8,219)  (5,538)

Total deferred tax liabilities

  (8,298)  (5,800)
         

Net deferred tax assets

 $9,218  $11,321 

 

Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:

 

  

December 31,

 
  

2021

  

2020

 
         

Deferred tax assets

 $11,472  $11,836 

Deferred tax liabilities

  (2,254)  (515)
  $9,218  $11,321 

 

For financial reporting purposes, net (loss) income from continuing operations before income taxes is as follows:

 

  

Year ended December 31,

 
  

2021

  

2020

 

United States

 $(704) $6,586 

Foreign

  553   437 
  $(151) $7,023 

 

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows:

 

  

Year ended December 31,

 
  

2021

  

2020

 
         

Statutory income tax rate

  21%  21%

Increase (decrease) in tax provision resulting from:

        

Equity compensation

  11.6   4.5 

Acquisition-related costs

  (34.7)   

Income tax credits

  72.7   (2.3)
Foreign tax rate change  (89.7)  - 

Foreign tax rates

  (15.5)  0.1 

States taxes

  (10.8)  0.3 

Other

  (7.0)  0.5 

Effective income tax rate

  (52.4)%  24.1%

 

As of December 31, 2021, it was concluded that it is more likely than not that our U.S. deferred tax assets will be fully realized on the basis of management’s assessment.  In evaluating the realizability of our U.S. deferred tax assets, management considered all available evidence and concluded that positive factors, including our sustained profitability and continued improvement in our ability to achieve internal earnings forecasts, outweighed all negative factors, including our history of operating losses (prior to 2015) and historical operating volatility.  Our assessment also considered our ability to fully utilize before expiration our domestic net operating loss carryforwards, which expire 2022 thru 2037, and our general business tax credit carryforwards, which expire 2028 thru 2039.  As of December 31, 2021, our domestic net operating loss carryforwards and general business tax credits were $44,716 and $2,239, respectively.

 

As of December 31, 2021, for certain past operations in the U.K., we continue to report a valuation allowance for net operating loss carryforwards of approximately $11,000, nearly all of which can be carried forward indefinitely. Management has concluded that utilization of the U.K. net operating losses may be limited due to the change in the past U.K. operation, and that they cannot currently be used to reduce taxable income of our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.

 

As of December 31, 2021, we have not recognized a valuation allowance against our other foreign deferred tax assets.

 

There were no unrecognized tax benefits related to uncertain tax positions at December 31, 2021 and 2020.

 

As of December 31, 2021, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

 

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.  In August 2020, the Internal Revenue Service (“IRS”) completed its examination of the Company’s federal tax returns for 2016-2018 with no material adjustments identified.  Our U.S. tax matters for 2020 and 2019 remain subject to IRS examination.  Our U.S. tax matters for 2002, 2005-2007 and 2011-2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for 2002, 2005-2007 and 2011-2020 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2011 through 2020 remain subject to examination by the respective foreign tax jurisdiction authorities.