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Note 6 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | note 6. INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA” or the Act) was enacted. The legislation significantly changed U.S. tax law by lowering the federal corporate tax rate from 34.0% to 21.0%, effective January 1, 2018, modifying the foreign earnings deferral provisions, and imposing a one -time toll charge on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Effective for 2018 and forward, there is a tax on global intangible low-taxed income provisions (“GILTI”) which has been considered in the provision for income taxes.. The income tax expense for the years ended December 31, 2019 and 2018 consists of the following:
|  | 2019 |  |  | 2018 |
Current taxes - Federal |  | $ | 248 |  |  | $ | (38 | )
Current taxes - State |  |  | 11 |  |  |  | 10 |
Current taxes - Foreign |  |  | 150 |  |  |  | 334 |
Deferred taxes - Foreign |  |  | - |  |  |  | 20 |
Income tax expense |  | $ | 409 |  |  | $ | 326 |
The statutory rate reconciliation for the years ended December 31, 2019 and 2018 is as follows:
|  | 2019 |  |  | 2018 |
Statutory federal tax provision (benefit) |  | $ | (172 | ) |  | $ | 107 |
State income tax benefit |  |  | (29 | ) |  |  | (36 | )
Effect of foreign operations |  |  | (23 | ) |  |  | 52 |
FIN 48 adjustment, including federal benefit for state reserves |  |  | 44 |  |  |  | (19 | )
Income tax credits |  |  | (70 | ) |  |  | - |
Valuation allowance |  |  | 789 |  |  |  | (199 | )
Permanent differences |  |  | 36 |  |  |  | 15 |
Global Intangile Low-Taxed Income Effect |  |  | 80 |  |  |  | 296 |
Return to Provision - Credits and NOL |  |  | (240 | ) |  |  | 176 |
Deferred adjustments |  |  | (16 | ) |  |  | (62 | )
Other |  |  | 10 |  |  |  | (4 | )
Income tax expense |  | $ | 409 |  |  | $ | 326 |
(Loss) Income from operations before income taxes was derived from the following sources:
|  | 2019 |  |  | 2018 |
Domestic |  | $ | (1,512 | ) |  | $ | (1,090 | )
Foreign |  |  | 693 |  |  |  | 1,582 |
Total |  | $ | (819 | ) |  | $ | 492 |
Deferred tax (liabilities) assets at December 31, 2019 and 2018, consist of the following:
|  | 2019 |  |  | 2018 |
Deferred Tax |  |  |  |  |  |  |  |
Allowance for uncollectable accounts |  | $ | 79 |  |  | $ | 53 |
Inventories reserve |  |  | 348 |  |  |  | 267 |
Accrued vacation |  |  | 112 |  |  |  | 145 |
Accrued bonus |  |  | 171 |  |  |  | - |
Stock-based compensation and equity appreciation rights |  |  | 62 |  |  |  | 54 |
Lease Accounting ASC 842 Lease Liability |  |  | 1,230 |  |  |  | - |
Section 481(a) adjustment |  |  | 716 |  |  |  | (249 | )
Net operating loss carryforwards |  |  | 97 |  |  |  | 175 |
Tax credit carryforwards |  |  | 171 |  |  |  | 449 |
Other |  |  | 7 |  |  |  | 76 |
Total |  |  | 2,993 |  |  |  | 970 |
Valuation allowance |  |  | (1,403 | ) |  |  | (614 | )
Deferred tax (liabilities) assets |  |  | 1,590 |  |  |  | 356 |
Prepaid expenses |  |  | - |  |  |  | (40 | )
Lease Accounting ASC 842 Lease Asset |  |  | (1,158 | ) |  |  | - |
Property and equipment |  |  | (432 | ) |  |  | (316 | )
Deferred tax liabilities |  |  | (1,590 | ) |  |  | (356 | )
Net deferred tax assets |  | $ | - |  |  | $ | - |
We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and state net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our consolidated financial statements become deductible for income tax purposes, or when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards. Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives. In analyzing the need for a valuation allowance, we considered our history of operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all our U.S. based deferred tax assets. At December 31, 2019, we had federal general business tax credit carryforwards of $284 that will begin to expire in 2028, if unused. For U.S. state tax purposes, we have Minnesota R&D credit carryforwards of $190 and various state net operating loss carryforwards of $1, The state credits and NOLs expire at various years starting in 2024. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2019 and 2018 (in thousands):
Balance as of December 31, 2018 |  | $ | 33 |
Tax positions related to current year: |  |  |  |
Additions based on tax positions related to the current year |  |  | 11 |
Statute of limitations |  |  | - |
Balance as of December 31, 2019 |  | $ | 44 |
| ● | The $44 of unrecognized tax benefits as of December 31, 2019 includes $25 which, if ultimately recognized, will reduce our annual effective tax rate. The remainder would be a reduction in the deferred tax asset and valuation allowance.
Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2019 and 2018 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2019, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax year 2016.

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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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