INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

14. INCOME TAXES

The components of income (loss) before taxes are summarized below:

	Year Ended Decmber 31,
	2016			2015
Earnings before income taxes
U.S. operations	$	(2,574	)	$	(7,563	)
Foreign operations		2,398			(1,020	)
Income (loss) before income taxes	$	176		$	(8,583	)

The components of the income tax provision (benefit) were as follows:

	Year Ended Decmber 31,
	2016			2015
Current
Federal	$	—		$	—
State		119			6
Foreign		1,184			—
Deferred		(416	)		(2,708	)
Total income tax provision	$	887		$	(2,702	)

A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on income (loss) before taxes, is as follows:

	Year Ended Decmber 31,
	2016			2015
Federal income tax at statutory rate	$	(61	)	$	(3,004	)
State and local income tax, net		12			(343	)
Foreign rate differential		199			645
Other permanent items		(319	)		—
Foreign tax credit		38			—
True-up and other		1,018			—
Total	$	887		$	(2,702	)

The Company’s provision for income taxes reflects an effective tax rate on income (loss) before income taxes of 504% in 2016, as compared to 31% in 2015. The increase in the Company’s effective tax rate during 2016 primarily reflects the correction of a prior year error in the current year, and the recognition of prior period adjustments resulting from an audit of our tax returns in Canada as well as the permanent benefit resulting from the abatement of payroll tax penalties. 

Provision has not been made for U.S. or additional foreign taxes on undistributed income of the Canadian foreign subsidiary, which have been, and will continue to be reinvested with the exception of certain deemed dividends.  This income could become subject to additional tax if they were remitted as dividends, if foreign income were loaned to us or a U.S. affiliate, or if we should sell, transfer or dispose of our stock in the foreign subsidiaries.  However, due to the availability of foreign tax credits, we do not believe there would be any material deferred tax liability as a result of the company’s un-repatriated foreign earnings.  As of December 31, 2016, the cumulative amount of undistributed income was approximately $17.9 million.

The net deferred income tax asset (liability) was comprised of the following:

	December 31,
	2016			2015
Noncurrent deferred income taxes
Total assets	$	5,569		$	3,642
Total liabilities		(2,400	)		(781	)
Net noncurrent deferred income tax asset (liability)		3,259			2,861
Net deferred income tax asset (liability)	$	3,259		$	2,861

The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

	December 31,
	2016			2015
Deferred tax assets
Canada net operating loss carryforward	$	—		$	37
U.S. net operating loss carryforward		—			1,361
Non-deductible reserves		1,122			711
Pension plan		47			—
Foreign tax credits		3,463			1,111
Fixed assets		116			—
Intangibles		920			737
Other		(9	)		368
Valuation allowance		—			(431	)
Net deferred tax assets		5,659			3,894
Deferred tax liabilities
Fixed assets		(1,065	)		(1,033	)
Intangibles		(1,335	)		—
Net deferred tax liabilities		(2,400	)		(1,033	)
Deferred asset (liability), net	$	3,259		$	2,861

The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is judgmental.  We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future.  Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations.  Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved.  Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods.  We believe that it is more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value assigned to our deferred tax assets.  However, if future events cause us to conclude that it is not more likely than not that we will be able to recover all of the value assigned to our deferred tax assets, we will be required to adjust our valuation allowance accordingly.

As of December 31, 2016, the Company does not have net operating loss carry-forwards available in the United States or Canada. The Company has approximately $3.5 million of foreign tax credits which expire in 2018 and $39 of research and development credits which expire in 2032.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, exclusive of interest and penalties, is as follows:

	Uncertain Tax Position
Balance as of January 1, 2015	$	317
No activity		—
Balance as of December 31, 2015	$	317
Decreases related to tax return becoming statuted barred during the year		(113	)
Balance as of December 31, 2016	$	204

The Company’s policy is to recognize interest and penalties related to income tax matters as interest expense. Interest and penalties as they relate to the payroll tax issue are recorded as Other Expense.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, 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 taxes in the period such resolution occurs. Although timing of the resolution and/or closure of audits is highly uncertain, the Company does not believe it is reasonably possible that its unrecognized tax benefits would materially change in the next twelve months.

The tax years subject to examination by major tax jurisdiction include the years 2011 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2010 and, generally, 2012 and forward, for the Canadian jurisdiction.