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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 7. Income Taxes Income (loss) before provision for income taxes was generated from the following sources (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Domestic |  | $ | 10,833 |  |  | $ | (2,541 | )
Foreign |  |  | (31 | ) |  |  | (186 | )
Total loss before provision for income taxes |  | $ | 10,802 |  |  | $ | (2,727 | )
A summary of the income tax expense (benefit) is as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (132 | ) |  | $ | (265 | )
State |  |  | 7 |  |  |  | 2 |
Foreign |  |  | 108 |  |  |  | 63 |
Total current |  |  | (17 | ) |  |  | (200 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 144 |  |  |  | 265 |
State |  |  | — |  |  |  | — |
Foreign |  |  | (47 | ) |  |  | (52 | )
Total deferred |  |  | 97 |  |  |  | 213 |
Total income tax expense (benefit) |  | $ | 80 |  |  | $ | 13 |
A reconciliation of the provision for income taxes to the amount of income tax expense (benefit) that would result from applying the federal statutory rate to the loss before income taxes is as follows:
|  | Year Ended December 31, |  |
|  | 2019 |  |  | 2018 |  |
Federal statutory rate |  |  | 21.0 |  | % |  | 21.0 |  | %
State tax, net of federal benefit |  |  | 3.6 |  |  |  | 3.0 |  |
Equity compensation |  |  | 0.1 |  |  |  | (0.7 | ) |
International tax items |  |  | 0.2 |  |  |  | (1.7 | ) |
Foreign taxes |  |  | 0.6 |  |  |  | (0.4 | ) |
State NOL true-up |  |  | (6.1 | ) |  |  | (30.4 | ) |
Miscellaneous |  |  | 0.4 |  |  |  | (7.7 | ) |
Effect of change in rate |  |  | 0.9 |  |  |  | (12.6 | ) |
Change in valuation allowance |  |  | (19.8 | ) |  |  | 29.0 |  |
|  |  | 0.7 |  | % |  | (0.5 | ) | %
The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Deferred income tax assets |  |  |  |  |  |  |  |
Net operating loss carry forwards |  | $ | 41,650 |  |  | $ | 41,356 |
Credit carry forwards |  |  | 3,159 |  |  |  | 3,292 |
Fixed assets |  |  | 373 |  |  |  | 493 |
Intangibles |  |  | 4,679 |  |  |  | 6,417 |
Equity-based compensation |  |  | 308 |  |  |  | 439 |
Nondeductible accruals |  |  | 319 |  |  |  | 565 |
Various reserves |  |  | 209 |  |  |  | 55 |
Other |  |  | 2 |  |  |  | 107 |
Valuation allowance |  |  | (50,397 | ) |  |  | (52,414 | )
Total deferred income taxes - net |  |  | 302 |  |  |  | 310 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Foreign intangibles |  |  | (27 | ) |  |  | (74 | )
Unrealized translation gain/loss |  |  | (120 | ) |  |  | (4 | )
Prepaid expenses |  |  | (61 | ) |  |  | (41 | )
Total deferred income liabilities |  |  | (208 | ) |  |  | (119 | )
Net deferred income tax assets |  | $ | 94 |  |  | $ | 191 |
The Company has federal and state net operating loss (“NOL”) carryforwards of approximately $158.1 million and $145.9 million, respectively, at December 31, 2019, to reduce future cash payments for income taxes. These federal NOL carryforwards will expire from 2024 through 2037 and state NOL carryforwards will expire 2019 through 2039. The Company also had $0.1 million of alternative minimum tax credit carryforwards with an indefinite life, available to offset regular federal income tax requirements. The Company has federal and state tax credit carryforwards of approximately $2.5 million and $0.7 million, respectively, at December 31, 2019. These tax credits will begin to expire in 2028. To the extent that an ownership change has occurred under Internal Revenue Code Sections 382 and 383, the Company’s use of its loss carryforwards and credit carryforwards to offset future taxable income may be limited. At December 31, 2019 and 2018, the Company had unrecognized tax benefits, including interest and penalties, of approximately $0.4 million. The Company’s gross unrecognized tax benefits as of December 31, 2019 and 2018 and the changes in those balances are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Beginning balance |  | $ | 428 |  |  | $ | 428 |
Increases (decreases) in tax positions for the current year |  |  | — |  |  |  | — |
Increases (decreases) in tax positions for the prior year |  |  | — |  |  |  | — |
Gross unrecognized tax benefits, ending balance |  | $ | 428 |  |  | $ | 428 |
We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards. In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company was in a five-year historical cumulative loss as of the end of fiscal 2018. These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets. After a review of the four sources of taxable income as of December 31, 2019 (as described above), and after consideration of the Company’s cumulative loss position as of December 31, 2019, the Company recorded a valuation allowance related to its U.S.-based deferred tax assets of $50.4 million at December 31, 2019. The valuation allowance on deferred tax assets decreased by $2.0 million and $0.5 million in 2019 and 2018, respectively. We recognized interest and penalties accrued related to unrecognized tax benefits in income tax expense. During 2019 and 2018, we recognized $0 in interest and penalties. The cumulative interest and penalties at December 31, 2019 and 2018 were $0. We do not anticipate any material changes to unrecognized tax benefits within the next twelve months that will affect the effective tax rate. The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Currently there are no audits in process or pending from Federal or state tax authorities. State income tax returns are subject to examination for a period of three to four years after filing. As of December 31, 2019, the company had no outstanding tax audits. 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 tax in the period such resolution occurs. As of December 31, 2019, a current estimate of the range of changes that may occur within the next twelve months cannot be made due to the uncertainty regarding the timing of these events. For financial reporting purposes, income (loss) before provision for income taxes for our foreign subsidiaries was $(31) thousand and $(186) thousand for the years ended December 31, 2019 and 2018, respectively. We do not provide for U.S. taxes on our unremitted earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S. As a part of the provisions of the 2017 Act, the corporate alternative minimum tax (“AMT”) has been repealed for tax years beginning after December 31, 2017. Taxpayers with AMT credit carryforwards that have not yet been used may claim a refund in future years for those credit. Since the AMT credit will now be fully refundable regardless of whether there is a future income tax liability before AMT credits, the benefit of the AMT credit will be realized in the future. Accordingly, a valuation allowance established against AMT credit carryforward balance is no longer necessary and a benefit has been recognized with respect to a $0.5 million AMT credit carryforward balance that was generated with 2011 net operating loss carrybacks. The Company has opted to reflect the balance as part of deferred tax asset balance. With the filing of the 2019 federal tax return, the Company will receive a refund of $133 thousand of the balance and this amount has been classified as a federal income tax receivable. The 2017 Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. The current income related to the GILTI inclusion in 2019 is less than $59 thousand.

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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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