Note 10 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10. INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and were reflected in the three months ended March 31, 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification would increase the allowable interest expense deduction of the Company and result in a net operating loss (“NOL”) for the year ended December 31, 2019.  The Company intends to carry back the NOL to the tax year ended December 31, 2015 and has reflected this impact in the tax provision for the three months ended March 31, 2020.  Due to the foregoing, and as a result of the difference in corporate tax rates in the NOL carryback period, the Company recognized a benefit associated with the enactment of the CARES act in the nine months ended September 30, 2020.

On July 20, 2020, the Department of the Treasury and the Internal Revenue Service issued a final regulation under Section 954A as enacted by the 2017 tax reform legislation.  These regulations relate to the treatment of income that is subject to a high rate of foreign tax under the global intangible low-taxed income (GILTI) income regimes. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their GILTI computation on an elective basis and contain modifications on the level at which the estimated tax rate test is applied.  The election can be made annually for tax years that begin after December 31, 2017. The final regulations impacted the income tax provision computations for the Company’s 2018 and 2019 tax years and were reflected in the three months ended September 30, 2020, or the period of enactment.  Due to the foregoing, and as a result of the NOL carryforward created by the exclusion, the Company recognized a benefit associated with the final regulations for the three months ended September 30, 2020.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions.  The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2016 and for state examinations before 2013.  Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2009 in Asia and generally 2011 in Europe.  The Company is currently under examination by the taxing authorities in Slovakia for the tax year 2014 and has accrued tax based on preliminary findings.

As a result of the expiration of the statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company’s consolidated financial statements at September 30, 2020.  The Company’s liabilities for uncertain tax positions totaled $27.7 million and $29.1 million at September 30, 2020 and December 31, 2019, respectively, of which $2.4 million and $2.2 million is included in other current liabilities at September 30, 2020 and December 31, 2019, respectively and are expected to be resolved during 2021 and 2020, respectively, by way of expiration of the related statute of limitations.  These amounts, if recognized, would reduce the Company’s effective tax rate

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. During the nine months ended September 30, 2020 and 2019, the Company recognized $0.6 million and $0.5 million, respectively, in interest and penalties in the condensed consolidated statements of operations during each period.  During the nine months ended September 30, 2020, the Company recognized a benefit of $0.5 million for the reversal of such interest and penalties, relating to the settlement of the liability for uncertain tax positions.  The Company has approximately $5.0 million and $4.9 million, respectively, accrued for the payment of interest and penalties at September 30, 2020 and December 31, 2019, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.