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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 10 ) | INCOME TAXES
We are subject to Federal and certain state income taxes. In addition, we are taxed in certain foreign countries. On December 22, 2017 the President of the United States signed into law the Tax Act. One of the principal elements of the Tax was a one -time transition tax that was imposed on the previously unremitted earnings of our foreign subsidiaries. Due to the complexities involved in determining the previously unremitted earnings of our foreign subsidiaries, at December 31, 2017, we recorded a provisional amount for the transition tax payable on those unremitted earnings. The provisional amount recorded, net of related foreign tax credits, was a tax of $476. During the first half of 2018 we completed the process of obtaining, preparing and analyzing the required information, including a Section 965 analysis and an earnings and profits study. As a result, we determined that no transition tax was due, and, accordingly, during the second quarter of 2018 we reversed the $476 that had been accrued in the fourth quarter of 2017. Earnings before income taxes was as follows:
|  | Years Ended December 31, |
|  | 201 9 |  |  | 201 8 |
Domestic |  | $ | 1,804 |  |  | $ | 3,647 |
Foreign |  |  | 800 |  |  |  | 1,396 |
Total |  | $ | 2,604 |  |  | $ | 5,043 |
Income tax expense (benefit) was as follows:
|  | Years Ended December 31, |
|  | 201 9 |  |  | 201 8 |
Current |  |  |  |  |  |  |  |
Domestic – Federal |  | $ | 510 |  |  | $ | 1,352 |
Domestic – state |  |  | 101 |  |  |  | 190 |
Foreign |  |  | 97 |  |  |  | 381 |
Total |  | $ | 708 |  |  | $ | 1,923 |
Deferred |  |  |  |  |  |  |  |
Domestic – Federal |  | $ | (413 | ) |  | $ | 103 |
Domestic – state |  |  | (13 | ) |  |  | (20 | )
Foreign |  |  | - |  |  |  | - |
Total |  |  | (426 | ) |  |  | 83 |
Income tax expense |  | $ | 282 |  |  | $ | 2,006 |
Deferred income taxes reflect the net tax effect of net operating loss and tax credit carryforwards as well as temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of our deferred tax assets and liabilities as of December 31, 2019 and 2018:
|  | December 31, |
|  | 201 9 |  |  | 201 8 |
Deferred tax assets: |  |  |  |  |  |  |  |
Operating lease liabilities |  | $ | 1,123 |  |  | $ | - |
Net operating loss (state and foreign) |  |  | 280 |  |  |  | 299 |
Inventories |  |  | 247 |  |  |  | 212 |
Accrued vacation pay and stock-based compensation |  |  | 279 |  |  |  | 184 |
Tax credit carryforwards |  |  | 112 |  |  |  | 81 |
Allowance for doubtful accounts |  |  | 44 |  |  |  | 46 |
Accrued warranty |  |  | 19 |  |  |  | 20 |
Acquisition costs |  |  | 12 |  |  |  | 13 |
Other |  |  | 13 |  |  |  | 18 |
Total |  |  | 2,129 |  |  |  | 873 |
Valuation allowance |  |  | (234 | ) |  |  | (241 | )
Deferred tax assets |  |  | 1,895 |  |  |  | 632 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Net intangible assets |  |  | (2,923 | ) |  |  | (3,167 | )
Right of use assets |  |  | (1,066 | ) |  |  | - |
Depreciation of property and equipment |  |  | (169 | ) |  |  | (154 | )
Deferred tax liabilities |  |  | (4,158 | ) |  |  | (3,321 | )
Net deferred tax liabilities |  | $ | (2,263 | ) |  | $ | (2,689 | )
The net change in the valuation allowance for the years ended December 31, 2019 and 2018 was a decrease of $7 and $129, respectively. In assessing the ability to realize the deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the total deferred tax assets, we will need to generate future taxable income prior to the expiration of net operating loss and tax credit carryforwards which expire in various years through 2039. An analysis of the effective tax rate for the years ended December 31, 2019 and 2018 and a reconciliation from the expected statutory rate of 21% is as follows:
|  | Years Ended December 31, |
|  | 201 9 |  |  | 201 8 |
Expected income tax provision at U.S. statutory rate |  | $ | 547 |  |  | $ | 1,059 |
Increase (decrease) in tax from: |  |  |  |  |  |  |  |
Restricted stock |  |  | 114 |  |  |  | 67 |
Dividend from foreign subsidiaries |  |  | 97 |  |  |  | 175 |
NOL carryforwards utilized |  |  | 32 |  |  |  | 118 |
Global intangible low taxed income |  |  | 30 |  |  |  | 57 |
Nondeductible expenses |  |  | 4 |  |  |  | 1,466 |
Current year tax credits (foreign and research) |  |  | (234 | ) |  |  | (553 | )
Domestic tax expense (benefit), net of Federal benefit |  |  | (184 | ) |  |  | 310 |
Section 250 foreign derived intangible income deduction |  |  | (145 | ) |  |  | (233 | )
Foreign income tax rate differences |  |  | (51 | ) |  |  | 90 |
Changes in valuation allowance |  |  | (7 | ) |  |  | (129 | )
Federal transition tax payable |  |  | - |  |  |  | (476 | )
Other |  |  | 79 |  |  |  | 55 |
Income tax expense |  | $ | 282 |  |  | $ | 2,006 |
In accounting for income taxes, we follow the guidance in ASC Topic 740 (Income Taxes) regarding the recognition and measurement of uncertain tax positions in our financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. Our policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2019 and 2018, we did not have an accrual for uncertain tax positions.

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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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