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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | 14. INCOME TAXES The components of income (loss) before income taxes are summarized below:
|  | Year Ended December 31,
|  | 2018 |  | 2017
Income/(loss) before income taxes |  |  |  |
U.S. operations |  | $ | (8,105 | ) |  | $ | (7,721 | )
Foreign operations |  |  | 2,744 |  |  |  | 1,535 |
Loss before income taxes |  | $ | (5,361 | ) |  | $ | (6,186 | )
The components of the income tax provision were as follows:
|  | Year Ended December 31,
|  | 2018 |  | 2017
Current |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | 71 |  |  |  | 176 |
Foreign |  |  | 584 |  |  |  | 643 |
Deferred |  |  | (352 | ) |  |  | 2,220 |
Total income tax provision |  | $ | 303 |  |  | $ | 3,039 |
A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows:
|  | Year Ended December 31,
|  | 2018 |  | 2017
Federal income tax at statutory rate |  | $ | (1,126 | ) |  | $ | (2,350 | )
State and local income tax, net |  |  | (314 | ) |  |  | (65 | )
Foreign rate differential |  |  | 157 |  |  |  | (143 | )
Other permanent items |  |  | 397 |  |  |  | 86 |
Impact of tax cuts and jobs act enactment |  |  | — |  |  |  | 516 |
Impact of repatriation of foreign subsidiary income |  |  | (330 | ) |  |  | 312 |
Valuation allowance |  |  | 1,581 |  |  |  | 4,710 |
True-up & other |  |  | (62 | ) |  |  | (27 | )
Total |  | $ | 303 |  |  | $ | 3,039 |
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. tax reform”) that lowers the statutory tax rate on U.S. earnings, taxes historic foreign earnings at a reduced rate of tax, establishes a quasi-territorial tax system and enacts new taxes associated with global operations. The impact of U.S. tax reform has been recorded on a provisional basis as the legislation provides for additional guidance to be issued by the U.S. Department of the Treasury on several provisions including the computation of the transitional tax. This amount was adjusted in 2018 based on guidance issued during the year. Additional guidance may be issued after 2018 and any resulting effects will be recorded in the quarter of issuances. In addition, analysis performed and conclusions reached as part of the tax return filing process and additional guidance on accounting for U.S. tax reform could affect the provisional amount. As part of tax reform, the U.S. has enacted a minimum tax on foreign earnings (“global intangible low-taxed income”) which is now being reflected in the income tax expense. The Company’s provision for income taxes reflects an effective tax rate on loss before income taxes of 5.7% in 2018, as compared to 49.1% in 2017. The decrease in the Company’s effective tax rate during 2018 primarily reflects the impact of the Tax Cuts and Jobs Act Enactment and the recognition of a valuation allowance. The Company intends to reimburse funds borrowed from its subsidiary during 2019. To finance the reimbursement the Canadian subsidiary will issue a limited dividend of $9,724. The Company has provided for $486 of Canadian withholding taxes as well as a loss $1,753 for foreign exchange upon realization of the dividend. Beyond the limited dividend, the Company has not established deferred income taxes on accumulated undistributed earnings of its foreign subsidiary, which are expected to be reinvested indefinitely. Repatriation of all accumulated earnings of its foreign subsidiary would be impracticable to the extent such earnings represent capital to support normal business operations. Although no U.S. federal taxes will be imposed on future distribution of foreign earnings, the distributions could be subject to Canadian withholding tax and state income taxes. The net deferred income tax asset was comprised of the following:
|  | December 31,
|  | 2018 |  | 2017
Noncurrent deferred income taxes |  |  |  |
Total assets |  | $ | 2,971 |  |  | $ | 2,729 |
Total liabilities |  |  | (1,592 | ) |  |  | (1,665 | )
Net noncurrent deferred income tax asset |  |  | 1,379 |  |  |  | 1,064 |
Net deferred income tax asset |  | $ | 1,379 |  |  | $ | 1,064 |
The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:
|  | December 31,
|  | 2018 |  | 2017
Deferred tax assets |  |  |  |
Canada net operating loss carry forward |  | $ | 120 |  |  | $ | 148 |
U.S. net operating loss carry forward |  |  | 659 |  |  |  | — |
Non-deductible reserves |  |  | 877 |  |  |  | 1,180 |
Non-deductible interest expense |  |  | 800 |  |  |  | — |
Pension plan |  |  | 39 |  |  |  | 75 |
Tax credits |  |  | 4,631 |  |  |  | 4,631 |
Fixed Assets |  |  | 26 |  |  |  | 104 |
Intangibles |  |  | 1,635 |  |  |  | 1,203 |
Other |  |  | 465 |  |  |  | 116 |
Valuation allowance |  |  | (6,281 | ) |  |  | (4,728 | )
Net deferred tax assets |  |  | 2,971 |  |  |  | 2,729 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Fixed Assets, Land |  |  | (313 | ) |  |  | (415 | )
Intangibles |  |  | (723 | ) |  |  | (764 | )
Other |  |  | (556 | ) |  |  | (486 | )
Net deferred tax liability |  |  | (1,592 | ) |  |  | (1,665 | )
Deferred tax asset, net |  | $ | 1,379 |  |  | $ | 1,064 |
The assessment of the amount of value assigned to the Company’s deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. The Company does not believe that it is more likely than not that future taxable income will be sufficient to allow the Company to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance on the Company’s domestic deferred tax assets as the combined effect of future domestic source income and the future reversals of future tax assets and liabilities may be insufficient to realize the full benefits of the assets. The increase in the valuation allowance during the year ended December 31, 2018 is primarily attributable to interest expense limitation pursuant to IRC Section 163 (J). During 2017, the Company had provided a valuation allowance of the Company's foreign tax credits as we had not anticipated generating sufficient foreign source income. As of December 31, 2018, the Company has approximately $2.6 million of net operating loss carryforwards. The Company has no Canadian net operating loss carryforwards. The Company has approximately $4.6 million of deferred tax assets on which it is taking a partial valuation allowance of approximately $1.6 million. The Company has approximately $4.6 million of foreign tax credits for which it has provided a full valuation allowance and $39 of research and development credits which expire in 2032. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, exclusive of interest and penalties, is as follows:
|  | Uncertain Tax Position |
Balance as of January 1, 2017 |  | $ | 204 |
Increases due to changes in foreign exchange |  |  | 14 |
Balance as of December 31, 2017 |  | $ | 218 |
Decreases related to tax return becoming statuted barred during the year |  |  | (89 | )
Balance as of December 31, 2018 |  | $ | 129 |
The Company’s policy is to recognize interest and penalties related to income tax matters as interest expense. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. Although timing of the resolution and/or closure of audits is highly uncertain, the Company does not believe it is reasonably possible that its unrecognized tax benefits would materially change in the next twelve months. The tax years subject to examination by major tax jurisdiction include the years 2011 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2014 and forward for the Canadian jurisdiction except for related non-resident transactions which would be open for the years 2011 and forward.

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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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