XML 38 R21.htm IDEA: XBRL DOCUMENT v3.24.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Components of income tax (benefit) expense are as follows:
(In thousands)December 31,
2023		December 31,
2022
Current:
Federal$(2,646)$214 
State29 29 
Foreign185 124 
(2,432)367 
Deferred:
Federal(3,386)(4,096)
State(989)(1,004)
(4,375)(5,100)
Valuation allowance4,375 5,100 
Total income tax (benefit) expense$(2,432)$367 

Below is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:
Year Ended December 31,
20232022
Federal tax provision21.0 %21.0 %
State taxes (net of federal benefit)4.6 %4.4 %
Valuation allowance(20.6)%(22.3)%
Incentive stock compensation expense(1.8)%(2.2)%
Section 162(m) compensation(1.4)%(1.1)%
GILTI (1.9)%(0.9)%
Uncertain tax positions9.8 %(0.9)%
Other1.7 %0.4 %
Total11.4 %(1.6)%
Major components of the Company’s deferred tax assets (liabilities) are as follows:
(In thousands)December 31,
2023		December 31,
2022
Deferred tax assets:
Loss and credit carryforwards$8,771 $7,476 
Stock-based compensation2,890 2,381 
   Research and development capitalization2,178 982 
   Lease liabilities1,276 — 
   Accrued insurance deductibles798 400 
   Interest expense limitation599 — 
   Accrued bonuses408 — 
   Deferred revenue325 339 
   Inventory 263A adjustment231 394 
Other556 553 
Total deferred tax assets18,032 12,525 
Valuation allowance(16,443)(12,068)
Total deferred tax assets, net of valuation allowance1,589 457 
Deferred tax liabilities:
Lease right-of-use assets (1,253)— 
Property and equipment(165)(205)
   Other(171)(252)
Total deferred tax liabilities(1,589)(457)
Net deferred tax assets$— $— 

The Company considers all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income.

The Company considers the earnings of Apyx Bulgaria, EOOD to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. It has not recorded a deferred tax liability related to the U.S. Federal and State income taxes and foreign withholding taxes on the undistributed earnings of Apyx Bulgaria, EOOD indefinitely invested outside the United States. If it decides to repatriate the foreign earnings, the Company will need to adjust its income tax provision in the period it determines that the earnings will no longer be indefinitely invested outside the United States. 

The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of December 31, 2023, the Company has no uncertain tax positions. As of December 31, 2022, the Company had recorded a liability of approximately $1.3 million related to uncertain tax positions and accrued approximately $0.8 million and of interest and penalties on these positions.
The following is a roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31:
(in thousands)Gross Unrealized Tax Benefits
20232022
Beginning of year balance$1,313 $1,313 
   Additions of tax positions related to the current year— — 
   Additions of tax positions related to the prior year — — 
   Decreases for tax positions related to prior year(1,313)— 
End of year balance$— $1,313 
The Company is subject to U.S. federal and state income tax examination. The Company’s 2021 through 2022 U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”). The Company’s state income tax returns are subject to examination for the 2019 through 2022 tax years.
During 2022, the Company was notified by the IRS that it was examining the Company’s 2018, 2019 and 2020 federal income tax returns. During January 2023, the Company was notified that the examination process was complete and that the Company's tax refunds were approved for substantially the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022. On August 10, 2023, the Company received $8.1 million from the IRS, which included approximately $0.4 million of interest on the $7.7 million of income tax refunds. In the examination, the Company's uncertain tax positions were accepted by the IRS as submitted on our income tax returns and the Company reversed its uncertain tax positions in January 2023.