Note 16 - Income Taxes

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 16.  Income Taxes

The Company’s effective tax rate for the three months ended September 30, 2021 and 2020 was 0% and (30.69)%, respectively. For the three months ended September 30, 2021, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change of the valuation allowance on federal, state, Taiwan, and China deferred tax assets ("DTA"). For the three months ended September 30, 2020, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change of valuation allowance on the federal, state, and Taiwan deferred tax assets, and the recording of a valuation allowance on China deferred tax assets.

The Company's effective tax rate for the nine months ended September 30, 2021 and 2020 was 0% and (19.15%), respectively. For the nine months ended September 30, 2021, the effective tax rate varied from the federal statutory rate of 21% primarily due to the benefit of the nontaxable PPP loan forgiveness, offset by the change of the valuation allowance on federal, state, Taiwan and China deferred tax assets. For the nine months ended September 30, 2020, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change of the valuation allowance on the federal, and state deferred tax assets, and the recording of a valuation allowance on Taiwan and China deferred tax assets.

The Company continually monitors and performs an assessment of the realizability of its DTAs, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s net deferred tax assets at September 30, 2021 was appropriate.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Stability Act (the "CARES Act") was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (“QIP”). On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was enacted as part of the Consolidated Appropriations Act, 2021, followed by the American Rescue Plan Act on March 1, 2021. These recent laws, among many other provisions, expand and extend the Paycheck Protection Program (“PPP”), refundable employee retention tax credits previously made available under the CARES Act and allow a full deduction for business meals for the 2021 and 2022 tax years. At this point we do not believe that these changes will have a material impact on our income tax provision for 2021. We will continue to evaluate the impact of new legislation on our financial position, results of operations, and cash flows.