Note 8 - Income Taxes

9 Months Ended

Sep. 30, 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

73.9%

and (

2.8

)% for the year to date periods ended

September 30, 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, plus the current year settlement of a tax year

2017

audit assessment.

Tax Year

s

2005

–

20

06

Settlemen

t

One of our foreign subsidiaries has been under local country audit for greater than

ten

years 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 have believed that there were 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.

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 continued to pursue other available legal processes as we continued to maintain our position that we were

not

liable for the majority of the alleged tax deficiencies. As of

December 31, 2018

and

September 30, 2019,

our estimated reserve (net of deposits) for these matters was approximately

$172,500

and

$165,200,

respectively.

In

November 2019,

under a tax amnesty program, we paid the local taxing authority approximately

$164,000

in final settlement of tax years

2005

and

2006.

Tax Year

2017

Settlement

In mid-

2019,

one

of our foreign subsidiaries received a local country tax year

2017

audit assessment alleging deficiencies of approximately

$217,000

plus interest. In the

third

quarter of

2019,

we paid the local taxing authority approximately

$96,000

in final settlement of the

2017

tax year audit. For the quarter and year to date periods ending

September 30, 2019,

our operating results include the amounts of

$55,000

,

$16,000

,

and

$25,000

for general taxes expense, interest expense, and income tax expense, respectively.