Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9.     INCOME TAXES

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 2018 and for state examinations before 2015.   Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2011 in Asia and generally 2013 in Europe. 

At December 31, 2021 and 2020, the Company has approximately $28.4 million and $28.5 million, respectively, of liabilities for uncertain tax positions (zero and $2.4 million, respectively, is included in other current liabilities on the consolidated balance sheets and $28.4 million and $26.1 million, respectively, is included in liability for uncertain tax positions on the consolidated balance sheets).  These amounts, if recognized, would reduce the Company’s effective tax rate.  As of December 31, 2021, approximately $4.1 million of the Company’s liabilities for uncertain tax positions are expected to be resolved during the next twelve months by way of expiration of the related statute of limitations.

A reconciliation of the beginning and ending amount of the liability for uncertain tax positions, including the portion included in income taxes payable, is as follows:

	Year Ended December 31,
	2021			2020
Liability for uncertain tax positions - January 1	$	28,516		$	29,061
Additions based on tax positions related to the current year		2,054			764
Translation adjustment		331			887
Settlement/expiration of statutes of limitations		(2,467	)		(2,196	)
Liability for uncertain tax positions - December 31	$	28,434		$	28,516

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 years ended December 31, 2021 and 2020, the Company recognized $0.7 million and $0.8 million, respectively, in interest and penalties in the consolidated statements of operations.  During the years ended December 31, 2021 and 2020, the Company recognized a benefit of $1.0 million and $0.5 million, respectively, for the reversal of such interest and penalties, relating to the expiration of statues of limitations and settlement of the acquired liability for uncertain tax positions, respectively.  The Company has approximately $5.0 million and $5.2 million accrued for the payment of interest and penalties at December 31, 2021 and 2020, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the consolidated balance sheets. 

The Company’s total earnings before provision for income taxes included earnings (losses) from domestic operations of $7.3 million and ($6.0) million for 2021 and 2020, respectively, and earnings before provision for income taxes from foreign operations of $20.0 million and $18.1 million for 2021 and 2020, respectively.
 

The provision (benefit) for income taxes consists of the following:

	Years Ended December 31,
	2021			2020
Current:
Federal	$	520		$	(1,555	)
State		126			168
Foreign		1,419			2,472
		2,065			1,085
Deferred:
Federal		863			(1,412	)
State		(54	)		(151	)
Foreign		(368	)		(181	)
		441			(1,744	)
	$	2,506		$	(659	)

A reconciliation of taxes on income computed at the U.S. federal statutory rate to amounts provided is as follows:

	Years Ended December 31,
	2021						2020
	$			%			$			%
Tax provision computed at the federal statutory rate	$	5,739			21	%	$	2,549			21	%
(Decrease) increase in taxes resulting from:
Different tax rates applicable to foreign operations		(1,641	)		(6	%)		311			3	%
Reversal of liability for uncertain tax positions - net		(413	)		(2	%)		(1,432	)		(12	%)
Impact of U.S. Tax Reform		-			0	%		(1,129	)		(9	%)
Research and experimentation and foreign tax credits		343			1	%		(245	)		(2	%)
State taxes, net of federal benefit		42			0	%		4			0	%
SERP/COLI and restricted stock income		(172	)		(1	%)		(234	)		(2	%)
Other, net		(1,392	)		(5	%)		(483	)		(4	%)
Tax provision (benefit) computed at the Company's effective tax rate	$	2,506			9	%	$	(659	)		(5	%)

As of December 31, 2021, the Company has $25.1 million of deferred tax assets, which the Company evaluates for utilization on an annual basis. The Company has gross federal, state and foreign net operating losses (“NOL”) of $30.1 million which amount to $6.8 million of deferred tax assets.  In addition, the Company has $1.3 million of credit carryforwards and acquired deferred tax assets of $0.9 million. The Company believes that it is more likely than not that the benefit arising from certain NOL, credit carryforwards and acquisition assets will not be realized.  In recognition of this risk, the Company has provided a valuation allowance of $8.1 million on these deferred tax assets. The federal and certain foreign NOL's can be carried forward indefinitely, the state and certain foreign NOL's expire at various times during 2025 – 2040 and the tax credit carryforwards expire at various times during 2028 - 2040.

Management has no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiaries as of December 31, 2021. Applicable income and dividend withholding taxes of $0.3 million have been reflected in the accompanying consolidated statements of operations for the year ended December 31, 2021. Due to the practicality of determining the deferred taxes on outside basis differences in our investments in our foreign subsidiaries, we have not provided for deferred taxes on outside basis differences and deemed that these basis differences will be indefinitely reinvested.
 

Components of deferred income tax assets and liabilities are as follows:

	December 31,
	2021		2020
	Tax Effect		Tax Effect
Deferred tax assets:
State tax credits	$	812	$	757
Unfunded pension liability		965		1,840
Reserves and accruals		4,124		3,181
Federal, state and foreign net operating loss and credit carryforwards		7,586		7,744
Depreciation		488		604
Amortization		130		142
Lease accounting		4,592		3,217
Other accruals		6,364		5,452
Total deferred tax assets		25,061		22,937
Deferred tax liabilities:
Depreciation		2,450		1,992
Amortization		6,483		6,541
Lease accounting		4,522		3,110
Other accruals		573		330
Total deferred tax liabilities		14,028		11,973
Valuation allowance		8,059		6,289
Net deferred tax assets	$	2,974	$	4,675

The Company continues to monitor proposed legislation affecting the taxation of transfers of U.S. intangible property and other potential tax law changes.