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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including: a federal corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive compensation; creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax; and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system. The change to a modified territorial tax system resulted in a one-time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. (the “Transition Tax”), with future distributions not subject to U.S. federal income tax when repatriated. A majority of the provisions in the Tax Act are effective January 1, 2018. In response to the Tax Act, the SEC staff issued guidance on accounting for the tax effects of the Tax Act. The guidance provides a one-year measurement period for companies to complete the accounting. The Company reflected the income tax effects of those aspects of the Tax Act for which the accounting is complete. To the extent a company's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, a company should record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. In connection with the Company's initial analysis of the impact of the Tax Act, the Company has recorded a provisional estimate of discrete net tax expense of $508,000 for the period ended December 31, 2017. This discrete expense consists of provisional estimates of zero expense for the Transition Tax, $173,000 net benefit for the decrease in the Company's deferred tax liability on unremitted foreign earnings, and $681,000 net expense for remeasurement of the Company's deferred tax assets and liabilities for the corporate rate reduction. During the year ended December 31, 2018, we completed our accounting for the income tax effects of the Tax Act. We did not recognize any additional discrete net tax expense in addition to the provisional amounts recorded at December 31, 2017 for the enactment-date effects of the Tax Act, for a total of $508,000 of discrete net tax expense. As of December 31, 2019, the Company is permanently reinvested in certain Non-U.S. subsidiaries and does not have a deferred tax liability related to its undistributed foreign earnings. The estimated amount of the unrecognized deferred tax liability attributed to future withholding taxes on dividend distributions of undistributed earnings for certain non-U.S. subsidiaries, which the Company intends to reinvest the related earnings indefinitely in its operations outside the U.S., is approximately $484,000 at December 31, 2019. The components of income before income tax expense are as follows (in thousands):
| Year Ended December 31,
| 2019 |  | 2018
U.S. | $ | 11,553 |  |  | $ | 8,677 |
Foreign | (2,604 | ) |  | (391 | )
| $ | 8,949 |  |  | $ | 8,286 |
Income tax expense consists of current and deferred components categorized by federal, state and foreign jurisdictions, as shown below. The current provision is generally that portion of income tax expense that is currently payable to the taxing authorities. The Company makes estimated payments of these amounts during the year. The deferred tax provision (benefit) results from changes in the Company’s deferred tax assets (future deductible amounts) and tax liabilities (future taxable amounts), which are presented in the table below:
| Current |  | Deferred |  | Total
| (In thousands)
Year Ended December 31, 2019 |  |  |  |  |
Federal | $ | 2,399 |  |  | $ | 257 |  |  | $ | 2,656 |
State | 516 |  |  | 47 |  |  | 563 |
Foreign | 1,539 |  |  | 36 |  |  | 1,575 |
| $ | 4,454 |  |  | $ | 340 |  |  | $ | 4,794 |
Year Ended December 31, 2018 |  |  |  |  |
Federal | $ | 1,938 |  |  | $ | (260 | ) |  | $ | 1,678 |
State | 650 |  |  | 22 |  |  | 672 |
Foreign | 1,461 |  |  | (186 | ) |  | 1,275 |
| $ | 4,049 |  |  | $ | (424 | ) |  | $ | 3,625 |
Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate applicable to the Company’s level of pretax income as a result of the following (in thousands):
| Year Ended December 31,
| 2019 |  | 2018
Federal tax at statutory rates | $ | 1,879 |  |  | $ | 1,738 |
State taxes, net of federal income tax benefit | 453 |  |  | 586 |
Change of valuation allowance | 2,032 |  |  | 1,565 |
Uncertain tax positions | 61 |  |  | (177 | )
Foreign income taxed at different rates | (261 | ) |  | (273 | )
Foreign equity investment | 172 |  |  | — |
Non-deductible expenses and other | 458 |  |  | 186 |
Total income tax expense | $ | 4,794 |  |  | $ | 3,625 |
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| December 31,
| 2019 |  | 2018
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 11,634 |  |  | $ | 9,805 |
Operating lease liabilities | 2,632 |  |  | — |
State income taxes | 100 |  |  | 82 |
Accruals and allowances | 327 |  |  | 292 |
Stock-based compensation | 643 |  |  | 910 |
Unrealized foreign exchange losses | 900 |  |  | 151 |
Deferred revenue | — |  |  | 377 |
Total deferred tax assets | 16,236 |  |  | 11,617 |
Valuation allowance | (11,634 | ) |  | (9,723 | )
Total deferred tax assets net of valuation allowance | 4,602 |  |  | 1,894 |
Deferred tax liabilities: |  |  |
Deferred revenue | (72 | ) |  | — |
Deferred rent | — |  |  | (80 | )
Operating lease right-of-use assets | (2,423 | ) |  | — |
Property, equipment and intangible assets | (56 | ) |  | (169 | )
Total deferred tax liabilities | (2,551 | ) |  | (249 | )
Net deferred tax assets | $ | 2,051 |  |  | $ | 1,645 |
Changes in the deferred tax assets valuation allowance for the years ended December 31, 2018 and 2019 are as follows (in thousands):
| Balance at the beginning of the year |  | Charged (Credited) to expenses |  | Charged (Credited) to other account (*) |  | Balance at end of year
Deferred tax assets valuation allowance |  |  |  |  |  |  |
2018 | $ | 9,249 |  |  | 1,565 |  |  | (1,091 | ) |  | $ | 9,723 |
2019 | $ | 9,723 |  |  | 2,032 |  |  | (121 | ) |  | $ | 11,634 |
(*) Amounts not charged (credited) to expenses are charged (credited) to stockholder's equity or deferred tax assets (liabilities). As of December 31, 2019, the Company has a valuation allowance of approximately $11.6 million related to foreign net operating loss (“NOL”) carryforwards of approximately $47.3 million for which it is more likely than not that the tax benefit will not be realized. The amount of the valuation allowance represented an increase of approximately $1.9 million over the amount recorded as of December 31, 2018, and was due to the increase in foreign operating losses. If not utilized, the foreign NOL of $26.6 million may be carried forward indefinitely, and $20.7 million will expire at various times between 2020 and 2028. The total amount of gross unrecognized tax benefits was $178,000 as of December 31, 2019, of which up to $152,000 would affect the Company’s effective tax rate if realized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits in 2018 and 2019 is as follows (in thousands):
Gross unrecognized tax benefits balance at January 1, 2018 | $ | 725 |
Increase related to current year tax positions | 15 |
Settlements | (501 | )
Gross unrecognized tax benefits balance at December 31, 2018 | 239 |
Increase related to current year tax positions | 7 |
Settlements | (68 | )
Gross unrecognized tax benefits balance at December 31, 2019 | $ | 178 |
The Company’s policy is to include interest and penalties related to unrecognized tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in the period that such determination is made. At December 31, 2019, the Company had approximately $207,000 in accrued interest. The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is subject to U.S. federal and certain state tax examinations for certain years after 2011 and is subject to California tax examinations for years after 2006. The material foreign jurisdictions where the Company is subject to potential examinations by tax authorities are the France, Germany, Spain and United Kingdom for tax years after 2010. Although the timing of initiation, resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of the gross unrecognized tax benefits related to the method of computing income taxes in certain jurisdictions and losses reported on certain income tax returns could significantly change in the next 12 months. These changes may occur through settlement with the taxing authorities or the expiration of the statute of limitations on the returns filed. The Company is unable to estimate the range of possible adjustments to the balance of the gross unrecognized tax benefits.

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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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