Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

(9) Income Taxes

For the years ended December 31, 2020, 2019 and 2018, income before income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2020		2019		2018
U.S. operations	$	(6,996)	$	(1,286)	$	(68)
Foreign operations		89,238		61,416		86,874
	$	82,242	$	60,130	$	86,806

Income tax expense attributable to income from continuing operations consisted of (in thousands):

	Year Ended December 31,
	2020		2019		2018
Current
Federal	$	(600)	$	122	$	210
State		447		89		98
Foreign		584		364		282
		431		575		590
Deferred
Federal		3,380		2,960		2,186
State		(2,686)		396		734
Foreign		675		852		1,579
		1,369		4,208		4,499
Income tax expense	$	1,800	$	4,783	$	5,089

The reconciliations between the Company’s income tax expense and the amounts computed by applying the U.S. federal income tax rate of 21.0% for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):

	Year Ended December 31,
	2020		2019		2018
Computed expected tax expense	$	17,271	$	12,627	$	18,229
Increase (decrease) in income taxes resulting from:
Foreign tax differential		(17,383)		(11,648)		(16,384)
State rate changes		(3,136)		-		-
State income tax expense, net of federal income tax benefit		(234)		433		534
Subpart F income		4,630		3,592		2,202
Change in valuation allowance		675		-		-
IRC Section 162(m) excess officer's compensation		63		215		172
Non-deductible stock-based compensation		63		94		133
Excess tax benefit related to stock-based compensation		(176)		(155)		(34)
Increase in uncertain tax positions		39		1		1
Adjustment for prior years		(57)		(13)		304
Other		45		(363)		(68)
	$	1,800	$	4,783	$	5,089

As of December 31, 2020, the Company had less than $0.1 million and $17.1 million of net operating loss (NOL) carry forwards available to offset future federal and state taxable income, respectively. The NOL carry forwards will not expire for federal income tax purposes and will begin to expire in 2029 for state income tax purposes.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2020 and 2019 are presented below (in thousands):

	Year Ended December 31,
	2020		2019
Deferred tax assets:
Accounts receivable	$	4	$	357
Accrued expenses and other current liabilities		791		422
Stock-based compensation		997		1,026
Other		133		86
Net operating loss carry forwards		2,503		21,087
Gross deferred tax assets		4,428		22,978
Valuation allowance		(1,363)		-
Net deferred tax assets		3,065		22,978
Deferred tax liabilities:
Depreciation and amortization		11,740		46,180
Foreign deferred tax liabilities		1,015		953
Intangible assets		-		1,167
Deferred subpart F income		14,752		10,054
Gross deferred tax liabilities		27,507		58,354
Net deferred tax liability	$	24,442	$	35,376

The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s management considers the projected future taxable income for making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company’s management believes it is more likely than not the Company will not realize the benefits of the net state deductible differences included in the above, and has thus recorded a valuation allowance against the state deferred tax assets.

Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries. As of December 31, 2020, the amount of such earnings totaled approximately $8.0 million. These earnings have been permanently reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. The amount of income taxes that would have resulted had such earnings been repatriated is not practically determinable.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):

Balance at December 31, 2018	$	291
Increases related to current year tax positions		12
Balance at December 31, 2019		303
Increases related to current year tax positions		176
Decrease related to lapsing of statute		(118)
Decrease related to prior year tax positions		(3)
Balance at December 31, 2020	$	358

The unrecognized tax benefits of $0.4 million at December 31, 2020, if recognized, would reduce the Company’s effective tax rate. The Company accrued potential interest and penalties of less than $0.1 million related to unrecognized tax benefits for each of the years ended December 31, 2020 and 2019.

‎

The Company’s tax returns, including the United States, California, New Jersey and South Carolina, are subject to examination by the tax authorities. On January 12, 2021, the Company received notification dated January 11, 2021 that the Barbados Revenue Authority would be examining CAL’s 2019 tax return. The Company accrues for unrecognized tax benefits based upon its best estimate of the additional taxes, interest and penalties expected to be paid. These estimates are updated over time as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations, or upon occurrence of other events.

The Company does not believe the total amount of unrecognized tax benefit as of December 31, 2020 will increase or decrease significantly in the next twelve months. As of December 31, 2020, the statute of limitations for tax examinations in the United States has not expired for the years ended December 31, 2016 through 2019. California, New Jersey and South Carolina have not expired for tax returns filed for the years ended December 31, 2016 through 2019. The Company was notified on May 1, 2017 that its 2015 U.S. federal income tax return was selected for examination. The examination was concluded on June 20, 2018 with no impact to tax expense.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the U.S. on March 27, 2020. The CARES Act includes several U.S. income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. The CARES Act does not have a material impact on the Company’s financial results.