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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
INCOME TAXES [Abstract]  
INCOME TAXES
7.  INCOME TAXES

The provision for income taxes consists of the following:

(in thousands)
  
Year Ended December 31,
  
Income Tax Benefit
  
2023
    
2022
  
Current provision (benefit):
            
Federal
  
$
892
    
$
16
  
State
    
181
      
41
  
Foreign
    
102
      
96
  
Related to UTP
    
(34
)
    
28
  
     
1,141
      
181
  
                 
Deferred provision (benefit):                
Federal
     (266 )     -  
State     (103 )     -  
Foreign     5       -  
      (364 )     -  
                 
Total tax provision (benefit)
   $ 777     $ 181  

Earnings occurring outside the U.S. are deemed to be indefinitely reinvested outside of the U.S. to support the Company’s foreign operations.  As a result, if the Company accumulates earnings overseas, they will be used for investment in the Company’s businesses outside the U.S.  The Company will use cash generated from U.S. operations and short- and long-term borrowings to meet the Company’s U.S. cash needs.  The determination of unrecognized deferred tax liabilities for temporary differences in investments in foreign subsidiaries is not practicable.

The Company has $0.7 million of state tax net operating loss (“NOL”) carryovers which will begin to expire in 2025.  We also have a full valuation allowance on $0.6 million of foreign tax NOL carryovers that do not expire.

Income before income taxes was earned in the following tax jurisdictions:

(in thousands)
  
Year Ended December 31,
  
Income (Loss) Before Income Taxes
  
2023
    
2022
  
United States
  
$
3,765
    
$
733
  
Spain
    
25
   
(83
)
Canada
    
755
      
758
TOTAL
  
$
4,545
    
$
1,408
  

The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows:

Deferred income tax assets:
  
2023
    
2022
  
(in thousands)
            
Inventory
  
$
412
    
$
471
  
Stock-based compensation
    
55
      
93
  
Accounts receivable
    
8
      
14
  
Sales returns
    
49
      
47
  
Foreign currency translation gain/loss in OCI
    
512
      
689
  
Net operating losses
    
182
      
261
  
Accrued expenses
    
170
      
63
  
Leases
    
108
      
152
  
Total deferred income tax assets
    
1,496
      
1,790
  
Less:  valuation allowance
    
(154
)
    
(1,151
)
Total deferred income tax assets, net of valuation allowance
  
$
1,342
    
$
639
  
                 
Property and equipment depreciation
  
$
471
    
$
639
  
Total deferred income tax liabilities
    
471
      
639
  
                 
Net deferred tax asset (liability)
  
$
871
    
$
-
  

We are required to reduce deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible.

As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.   As of December 31, 2023, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $1.3 million are realizable.  We reduced the valuation allowance accordingly.

Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, the difference in tax rates for loss carryback periods, foreign income/loss positions, expenses that are nondeductible for tax purposes, the change in our valuation allowance associated with our deferred tax assets, and differences in tax rates.  Below is a reconciliation of our effective tax rate from the statutory rate:

   
Year Ended December 31,
  
    2023    
2022
  
Statutory rate – Federal U.S. income tax
    
21.0
%
    
21.0
%
State and local taxes
    
5.3
%
    
(0.6
)%
Permanent book/tax differences
    
2.4
%
    
11.3
%
Change in valuation allowance
    
(6.8
)%
    
(20.3
)%
Interest on Uncertain Tax Position
    
(0.8
)%
    
2.0
%
Income tax credits
     (2.3 )%     -  
Other, net
    
(1.7
)%
    
(0.5
)%
Effective rate
    
17.1
%
    
12.9
%

We file a consolidated U.S. income tax return as well as state tax returns on a consolidated, combined, or stand-alone basis, depending on the jurisdiction.  We are no longer subject to U.S. federal income tax examinations by tax authorities for years prior to the tax year ended December 2021.  Depending on the jurisdiction, we are no longer subject to state examinations by tax authorities for years prior to the December 2020 and December 2021 tax years. We file tax returns in a limited number of foreign jurisdictions.

A reconciliation of the beginning and ending amount of uncertain tax positions (“UTP”) is as follows:

 
2023
    
2022
  
UTP at beginning of the year
  
$
450
    
$
415
  
Gross (decrease) increase to tax positions in current period
    
(27
)
    
7
  
Interest expense
    
(35
)
     28  
UTP at end of year
  
$
388
    
$
450