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OTHER LONG-TERM LIABILITIES

9 Months Ended

Sep. 30, 2016

11. OTHER LONG-TERM LIABILITIES

Unpaid and Past Due Payroll Tax Obligations

From January 1, 2014 through September 30, 2015, the Company failed to report and pay its Federal payroll tax obligations. During last fiscal quarter, the Company entered into installment payment agreements with the Internal Revenue Service for the payment of delinquent payroll tax liabilities. These agreements encompass approximately 97% of the amounts owed by the Company for delinquent payroll tax liabilities. As shown in the chart below, with the execution of these installment payment agreements the Company reclassified $2.1 million of this liability as long-term indebtedness, while $2.0 million of the delinquent payroll tax obligations are included in the accrued liabilities as of September 30, 2016.

The Company continues to pursue installment payment agreements for our Pioneer Critical Power Inc. division, as well as abatement of all penalties assessed by the Internal Revenue Service on the delinquent payroll taxes.

During the nine months ended September 30, 2016 the Company received waivers of certain interest and penalties on these obligations totaling $0.4 million. The Company had previously recorded these liabilities, resulting in the waivers being recognized as other expense when they were granted.

On October 24, 2016, the Internal Revenue Service has granted abatement for $1.2 million in previously accrued penalties related to the Company’s delinquent federal payroll tax obligations. The abatement covers 100% of the accrued penalties from Pioneer Power Solutions (Corporate), Pioneer CEP, and Jefferson Electric, with accrued penalties for Pioneer Critical Power, Inc. still being reviewed by the IRS for potential abatement. The remaining accrued penalty and related interest is approximately $72.

Deferred payments due for Harmonics Acquisition

As consideration for the purchase of Harmonics by the Company, the sellers agreed to defer a portion of the purchase price. These deferred payments to the sellers are to be made annually for a period of five years, with a balloon payment being due at the end of year five for the balance remaining. The annual payments are determined as a percentage of the prior year’s sales dollars of the Harmonics products.

Other long-term liabilities consist of the following (in thousands):

	September 30,		December 31,
	2016		2015
Past due payroll tax obligations, including interest and penalties	$	4,034	$	5,730
Net deferred payments due for Harmonics Acquisition	$	360	$	372
Total		4,394		6,102
Less current portion		1,933		5,730
Total other long-term liabilities	$	2,461	$	372