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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of the Company’s income before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):
| 2021 |  | 2020
United States | $ | 6,947 |  |  | $ | 4,934 |
Foreign | 1,945 |  |  | 791 |
Income before income taxes | $ | 8,892 |  |  | $ | 5,725 |
The components of the Company’s income tax provision (benefit) for the years ended December 31 (in thousands):
Current provision (benefit): | 2021 |  | 2020
Federal | $ | (17) |  |  | $ | (1,086) |
State | (161) |  |  | 114 |
Foreign | 956 |  |  | 716 |
| 778 |  |  | (256) |
Deferred provision (benefit): |  |  |
Federal | (1,183) |  |  | — |
State | (131) |  |  | — |
Foreign | (414) |  |  | (280) |
| (1,728) |  |  | (280) |
| $ | (950) |  |  | $ | (536) |
For the years ended December 31, 2021 and 2020, the Company’s effective tax rate was (10.7)% and (9.4)%, respectively. The Company's effective tax rate for the year ended December 31, 2021 differed from the statutory rate due to the release of valuation allowance on U.S. deferred tax assets due to the expectation of current and future utilization. The Company's effective tax rate for the year ended December 31, 2020 differed from the statutory rate due to the carryback of U.S net operating losses as allowed by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), enacted on March 27, 2020. A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:
| 2021 |  | 2020
Federal statutory income taxes | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 0.8 |  |  | 2.9 |
Difference in foreign and United States tax on foreign operations | 0.7 |  |  | 1.9 |
Effect of changes in valuation allowance | (45.0) |  |  | (7.7) |
CARES NOL Carryback Benefit | — |  |  | (25.3) |
Foreign Derived Intangible Income (FDII) deduction | (8.1) |  |  | (6.6) |
Global Intangible Low Taxed Income (GILTI)(1) | — |  |  | (7.3) |
Foreign Charitable Contributions | 0.7 |  |  | 1.4 |
Prior year adjustments | 1.3 |  |  | 8.2 |
Withholding taxes | 2.5 |  |  | 3.2 |
Changes to uncertain tax positions | (1.8) |  |  | — |
Expiration of tax attribute | 17.4 |  |  | — |
Other | (0.2) |  |  | (1.1) |
| (10.7) | % |  | (9.4) | %
(1)This amount relates to the reversal of the 2018 GILTI inclusion due to the GILTI high-tax election the IRS made available in Q3 2020. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):
Deferred tax assets: | 2021 |  | 2020
Deferred Revenue | $ | 409 |  |  | $ | 317 |
Inventory | 235 |  |  | 343 |
Accrued expenses | 1,352 |  |  | 1,034 |
Net operating loss (1) | 5,310 |  |  | 7,078 |
Equity Compensation | 242 |  |  | 296 |
Foreign tax credit carryover | 3,436 |  |  | 4,615 |
Lease liability | 763 |  |  | 922 |
Other | 664 |  |  | 443 |
Total deferred tax assets | $ | 12,411 |  |  | $ | 15,048 |
Valuation allowance | (7,934) |  |  | (11,933) |
Total deferred tax assets, net of valuation allowance | $ | 4,477 |  |  | $ | 3,115 |
Deferred tax liabilities: |  |  |
Prepaid expenses | 111 |  |  | 131 |
Deferred commissions | 450 |  |  | 305 |
Internally-developed software | 104 |  |  | 237 |
Lease assets | 717 |  |  | 884 |
Fixed assets | 270 |  |  | 383 |
Total deferred tax liabilities | $ | 1,652 |  |  | $ | 1,940 |
Total net deferred tax asset | $ | 2,825 |  |  | $ | 1,175 |
(1)The Company’s net operating loss will expire as follows (dollar amounts in thousands):
Jurisdiction | Gross NOL |  | Tax Effected NOL |  | Expiration Years
Australia | $ | 148 |  |  | $ | 44 |  |  | Indefinite
Bermuda | 63 |  |  | — |  |  | N/A
China | 606 |  |  | 151 |  |  | 2024-2026
Colombia | 1,654 |  |  | 496 |  |  | Indefinite
Cyprus | 1,371 |  |  | 171 |  |  | 2026
Gibraltar | 216 |  |  | — |  |  | Indefinite
Mexico | 6,313 |  |  | 1,894 |  |  | 2022-2028
Norway | 310 |  |  | 68 |  |  | Indefinite
Russia | 8 |  |  | 2 |  |  | Indefinite
Singapore | 147 |  |  | 25 |  |  | Indefinite
South Africa | 646 |  |  | 181 |  |  | Indefinite
Sweden | 456 |  |  | 94 |  |  | Indefinite
Switzerland | 6,765 |  |  | 622 |  |  | 2022-2028
Taiwan | 3,422 |  |  | 684 |  |  | 2022-2031
Ukraine | 9 |  |  | 2 |  |  | Indefinite
United Kingdom | 339 |  |  | 64 |  |  | Indefinite
United States - State | 13,574 |  |  | 812 |  |  | 2022-Indefinite
We have U.S. foreign tax credit carryforwards of $3.4 million as of December 31, 2021, which will begin to expire in 2024. The Company maintains a valuation allowance of $2.7 million against its foreign tax credit carryforwards. At December 31, 2021 and 2020, the Company’s valuation allowance was $7.9 million and $11.9 million, respectively. The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing a deferred tax asset cannot be met. A company is to use judgment in reviewing both positive and negative evidence of realizing a deferred tax asset. Furthermore, the weight given to the potential effect of such evidence is commensurate with the extent the evidence can be objectively verified. The valuation allowance against the Company's deferred tax assets consisted of the following at December 31 (in millions):
Country | 2021 |  | 2020
Australia | $ | — |  |  | $ | 0.2 |
China | 0.5 |  |  | 0.4 |
Colombia | 0.5 |  |  | 0.6 |
Cyprus | 0.2 |  |  | 0.2 |
Mexico | 1.9 |  |  | 3.1 |
Norway | 0.1 |  |  | 0.1 |
South Africa | 0.2 |  |  | 0.2 |
Switzerland | 0.5 |  |  | 0.5 |
Taiwan | 0.6 |  |  | 1.1 |
United States | 3.4 |  |  | 5.5 |
Total | $ | 7.9 |  |  | $ | 11.9 |
U.S. Tax Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets at December 31 as follows (in thousands):
| 2021 |  | 2020
Deferred tax assets | $ | 2,828 |  |  | $ | 1,178 |
Deferred tax liabilities | (3) |  |  | (3) |
Net deferred tax assets | $ | 2,825 |  |  | $ | 1,175 |
As of December 31, 2021, the Company had no unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, for the years ended December 31, 2021 and 2020 (in thousands):
| 2021 |  | 2020
Balance as of January 1 | $ | 79 |  |  | $ | 79 |
Additions for tax positions related to the current year | — |  |  | — |
Additions for tax positions of prior years | — |  |  | — |
Reductions of tax positions of prior years | — |  |  | — |
Settlements | (79) |  |  | — |
Balance as of December 31 | $ | — |  |  | $ | 79 |
The Company recognizes interest and/or penalties related to uncertain tax positions in current income tax expense. As of December 31, 2021, the Company had no accrued interest and penalties in the consolidated balance sheet or the consolidated statement of operations. As of December 31, 2020, the Company had accrued interest and penalties of $0.1 million in the consolidated balance sheet, of which $11 thousand were expensed in the consolidated statement of operations. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase or decrease within the next twelve months due to uncertainties regarding the timing of any examinations, the Company does not expect its unrecognized tax benefits to decrease during the next twelve months. The Company is subject to examination by taxing authorities in the United States and various state and foreign jurisdictions. As of December 31, 2021, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:
Jurisdiction | Open Years
Australia | 2013-2020
Japan | 2017-2020
Republic of Korea | 2017-2020
Switzerland | 2017-2020
United States | 2018-2020
The IRS has opened an audit for tax year 2019. Audit work has not yet been scheduled so it is impossible to estimate any additional tax liability or penalty that could result from the audit. We have not accrued a liability related to this audit at this time.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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