Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(11)  INCOME TAXES

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

Earnings before income taxes was as follows:

	Years Ended December 31,
	2023		2022
Domestic	$	9,600	$	9,575
Foreign		1,448		570
Total	$	11,048	$	10,145

Income tax expense was as follows:

	Years Ended December 31,
	2023			2022
Current
Domestic – Federal	$	2,139		$	2,892
Domestic – state		202			263
Foreign		522			267
Total	$	2,863		$	3,422
Deferred
Domestic – Federal	$	(1,052	)	$	(1,344	)
Domestic – state		31			(190	)
Foreign		(136	)		(204	)
Total		(1,157	)		(1,738	)
Income tax expense	$	1,706		$	1,684

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 at December 31, 2023 and 2022:

	December 31,
	2023			2022
Deferred tax assets:
Capitalized research and development costs	$	2,320		$	1,260
Operating lease liabilities		859			1,125
Accrued vacation pay and stock-based compensation		433			465
Inventories		395			602
Intangible assets		369			140
Net operating loss (state and foreign)		245			285
Acquisition costs		44			46
Allowance for doubtful accounts		44			43
Accrued warranty		26			54
Tax credit carryforwards		-			89
Other		62			-
Total		4,797			4,109
Valuation allowance		(245	)		(227	)
Deferred tax assets		4,552			3,882
Deferred tax liabilities:
Intangible assets		(1,949	)		(2,101	)
Right-of-use assets		(762	)		(996	)
Depreciation of property and equipment		(404	)		(385	)
Other		-			(120	)
Deferred tax liabilities		(3,115	)		(3,602	)
Net deferred tax assets	$	1,437		$	280

The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was an increase of $18 and $163, 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, 2023 and 2022 and a reconciliation from the expected statutory rate of 21% is as follows:

	Years Ended December 31,
	2023			2022
Expected income tax expense at U.S. statutory rate	$	2,320		$	2,131
Increase (decrease) in tax from:
Dividend from foreign subsidiaries		184			127
NOL carryforwards utilized		39			(80	)
Stock compensation		(329	)		77
Global intangible low taxed income		87			66
Nondeductible expenses		21			11
Current year tax credits (foreign and research)		(367	)		(465	)
Domestic tax benefit, net of Federal benefit		(167	)		87
Changes in valuation allowance		18			163
Foreign income tax rate differences		109			147
Section 250 foreign derived intangible income deduction		(272	)		(563	)
Other		63			(17	)
Income tax expense	$	1,706		$	1,684

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. At December 31, 2023 and 2022, 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, 2020 and thereafter are subject to examination by the relevant taxing authorities.