Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 9 – INCOME TAXES

As of December 31, 2021 and 2020 the Company recorded an income tax expense of $269,000 and income tax benefit of $1,737,000, respectively. The increase in the Company’s provision for income taxes as of December 31, 2021 is due to a loss on the write down of impaired assets in the prior year and decreased operating costs for the current period.

The components of the provision (benefit) for income taxes as of December 31, 2021 and 2020 consist of the following:

	YEARS ENDED December 31,
	2021			2020
Current:
Federal	$	9,000		$	209,000
State		93,000			88,000
Foreign		107,000			117,000
Total current		209,000			414,000
Deferred:
Federal		98,000			(1,909,000	)
State		(18,000	)		(266,000	)
Foreign		(20,000	)		24,000
Total deferred		60,000			(2,151,000	)
	$	269,000		$	(1,737,000	)

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2021 and 2020 are as follows:

	December 31,
	2021			2020
Deferred tax liabilities:
Property and equipment	$	(1,055,000	)	$	(564,000	)
Total deferred tax liabilities		(1,055,000	)		(564,000	)
Deferred tax assets:
Net operating loss carryforwards		360,000			99,000
Accruals and allowances		41,000			43,000
Lease liabilities		136,000			-
Tax credits		4,000			5,000
Other – net		87,000			50,000
Capital loss carryover		646,000			627,000
Total deferred tax assets		1,274,000			824,000
Valuation allowance		(697,000	)		(678,000	)
Deferred tax assets net of valuation allowance		577,000			146,000
Net deferred tax liabilities	$	(478,000	)	$	(418,000	)

These amounts are presented in the financial statements as follows:

	December 31,
	2021			2020
Deferred income taxes (non-current)	$	(478,000	)	$	(418,000	)
	$	(478,000	)	$	(418,000	)

The provision (benefit) for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (21% in 2021 and 2020) to income before taxes as follows:

	YEARS ENDED December 31,
	2021		2020
Computed expected federal income tax	$	79,000	$	(1,844,000	)
State income taxes, net of federal benefit		69,000		(199,000	)
Non-deductible expenses		28,000		6,000
Return to Provision True-up		19,000		22,000
Uncertain Tax Positions		14,000		16,000
Capital loss carryforward expiration		-		246,000
Change in valuation allowance		19,000		(243,000	)
Other deferred tax adjustments		41,000		259,000
	$	269,000	$	(1,737,000	)

As of  December 31, 2021, the Company has net operating loss carryforwards for federal and state income tax return purposes of approximately $1,100,000 and $3,167,000, respectively, that begin to expire in 2029. The Company has net operating loss carryforwards for its international subsidiaries of approximately $46,000.

Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. Any annual limitation may result in the expiration of net operating losses and credits before utilization.

At December 31, 2021, the Company has a capital loss carryforward for federal income tax return purposes of approximately $2,679,000 which starts to expire in 2024. The Company has capital loss carryforwards for state income tax purposes of approximately $129,000 which starts to expire in 2024.

Due to uncertainty surrounding the realization of impairment losses, capital losses and foreign operating losses in future years, the Company has placed a valuation allowance against a portion of its net domestic and foreign deferred tax assets. The net valuation allowance decreased by $465,000 and $243,000 for the tax years ended December 31, 2021 and 2020, respectively.

The tax return years 2017 through 2020 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. Net operating losses generated on a tax return basis by the Company for calendar years 1999 through 2004, 2009, 2010, 2012, 2014, 2015, 2016, 2017 and 2018 remain open to examination by the major domestic taxing jurisdictions.

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company's income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance.

As of December 31, 2021, the unrecognized tax benefit was $295,000 which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

	YEARS ENDED December 31,
	2021		2020
Balance at beginning of year	$	275,000	$	259,000
Additions based on tax positions of prior years		20,000		16,000
Balance at end of year	$	295,000	$	275,000

The Company's policy for deducting interest and penalties is to treat interest as interest expense and penalties as taxes. As of December 31, 2021, the Company had $28,000 accrued for the payment of penalties and zero interest related to unrecognized tax benefits. The Company does not expect any material changes to our uncertain tax positions within the next 12 months.