Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(13)  INCOME TAXES

We are subject to Federal and certain state income taxes. In addition, we are taxed in certain foreign countries.

Earnings (loss) before income taxes was as follows:

	Years Ended December 31,
	2021		2020
Domestic	$	7,372	$	(2,017	)
Foreign		1,030		786
Total	$	8,402	$	(1,231	)

Income tax expense (benefit) was as follows:

	Years Ended December 31,
	2021			2020
Current
Domestic – Federal	$	1,208		$	(182	)
Domestic – state		140			53
Foreign		259			135
Total	$	1,607		$	6
Deferred
Domestic – Federal	$	(387	)	$	(299	)
Domestic – state		(31	)		(7	)
Foreign		(70	)		(36	)
Total		(488	)		(342	)
Income tax expense	$	1,119		$	(336	)

Deferred income taxes reflect the net tax effect of net operating loss and tax credit carryforwards as well as temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of our deferred tax assets and liabilities as of December 31, 2021 and 2020:

	December 31,
	2021			2020
Deferred tax assets:
Operating lease liabilities	$	1,407		$	1,601
Inventories		387			321
Accrued vacation pay and stock-based compensation		354			252
Net operating loss (state and foreign)		205			241
Allowance for doubtful accounts		45			44
Accrued warranty		31			13
Acquisition costs		9			10
Tax credit carryforwards		17			5
Other		49			71
Total		2,504			2,558
Valuation allowance		(64	)		(169	)
Deferred tax assets		2,440			2,389
Deferred tax liabilities:
Net intangible assets		(2,381	)		(2,697	)
Right-of-use assets		(1,245	)		(1,400	)
Depreciation of property and equipment		(193	)		(214	)
Deferred tax liabilities		(3,819	)		(4,311	)
Net deferred tax liabilities	$	(1,379	)	$	(1,922	)

The net change in the valuation allowance for the years ended December 31, 2021 and 2020 was a decrease of $105 and $65, respectively. In assessing the ability to realize the deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the total deferred tax assets, we will need to generate future taxable income prior to the expiration of net operating loss and tax credit carryforwards which expire in various years through 2040. 

An analysis of the effective tax rate for the years ended December 31, 2021 and 2020 and a reconciliation from the expected statutory rate of 21% is as follows:

	Years Ended December 31,
	2021			2020
Expected income tax expense (benefit) at U.S. statutory rate	$	1,764		$	(259	)
Increase (decrease) in tax from:
Acquisition costs		163			-
Dividend from foreign subsidiaries		146			83
NOL carryforwards utilized		56			64
Restricted stock compensation		(126	)		62
Global intangible low taxed income		28			35
Nondeductible expenses		8			8
Current year tax credits (foreign and research)		(386	)		(82	)
Domestic tax benefit, net of Federal benefit		153			(68	)
Changes in valuation allowance		(105	)		(65	)
Foreign income tax rate differences		9			(34	)
Section 250 foreign derived intangible income deduction		(599	)		(9	)
Other		8			(71	)
Income tax expense (benefit)	$	1,119		$	(336	)

In accounting for income taxes, we follow the guidance in ASC Topic 740 (Income Taxes) regarding the recognition and measurement of uncertain tax positions in our financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. Our policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2021 and 2020, we did not have an accrual for uncertain tax positions.

We file U.S. income tax returns and multiple state and foreign income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ended December 31, 2017 and thereafter are subject to examination by the relevant taxing authorities.