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Note 8 - Income Taxes
 3 Months Ended
Mar. 31, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

8.

Income Taxes

 

During the three months ended March 31, 2021, the Company recorded an income tax benefit of $477 thousand. During the three months ended March 31, 2022, the Company recorded an income tax benefit of $1,059 thousand. The forecasted 2022 annual effective tax rate of 24.8% has been applied to Canadian income before income taxes for the three months ended March 31, 2022. The rate has not been applied against the US or Germany income before income taxes, as they are not expected to have a tax benefit or expense for the year in accordance with the exception provided in ASC 740-270-30-36.  The consolidated effective tax rate for the three months ended March 31, 2022 was 16.41%, including amounts recorded for discrete events. The forecasted ETR disclosed here is misleading or indicates a significant discrete expense item (i.e. this amount times the $6.5M YTD loss would indicate a higher YTD benefit).  This is due to the US forecasted to be be a full loss company with no benefit in the quarter and excluded from the estimated annual ETR.  Please consider revising.

 

The difference in the 27% Canadian statutory tax rate and the annual forecasted effective tax rate is primarily a result of the jurisdictional mix of earnings and losses, valuation allowances, and permanently disallowed stock compensation expenses. The Company maintains a valuation allowance against all deferred tax assets in Germany and the US, and certain deferred tax assets in Canada in the current and forecasted annual periods that we concluded are not more-likely-than-not to be realizable. The forecasted income tax benefit is primarily related to the ability to carry back losses in Canada to a prior year.

 

As of  December 31, 2021, there are $2.4 million of unrecognized tax benefits recorded as a liability on the Company’s financials. There was a $14 thousand increase in the liability during the three months ended March 31, 2022 due to additional accrued interest on existing liabilities.