Note 8 - Income Taxes

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8

. Income Taxes

During the fiscal years of

2016

through

2018,

we determined that it was more likely than

not

that U.S. federal and various state net operating losses generated in those years will

not

be realized based on projections of future U.S. taxable income, estimated reversals of existing taxable timing differences, and other considerations.

In prior years, we recorded a valuation allowance on all of our domestic and foreign deferred tax assets. The effective income tax rate was

7.1%

and (

7.7

)% for the quarter ended

March 31, 2019

and

2018,

respectively. The income tax provision amounts primarily represent estimated income taxes for

one

of the Company’s foreign subsidiaries and certain U.S. states.

One of our foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately

$800,000

plus interest at

20%

per annum) in value-added tax (VAT) and withholding tax for the years

2004

through

2006.

In consultation with our legal counsel, we believe that there are strong legal grounds that we should

not

be liable to pay the majority of the alleged tax deficiencies. In

2011,

we made good faith deposits of approximately

$173,000

to the local tax authority under the tax agency’s administrative judicial resolution process.

As of

December 31, 2018,

our estimated reserve (net of deposits) for this matter was approximately

$172,500

and remains unchanged in

2019.

In

May 2018,

we received a formal notice of denial of

one

of our appeals under the tax agency’s administrative judicial resolution process; however, we continue to pursue other available legal processes as we continue to maintain our position that we are

not

liable for the majority of the alleged tax deficiencies.