Note 6 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6

. Income Taxes

During the fiscal years of

2016

through

2019,

we determined that it was more likely than

not

losses generated in the U.S. and certain foreign jurisdictions will

not

be realized based on projections of future 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.

Reliv' International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

6

. Income Taxes

(continued)

Under the

March 2020

U.S. CARES Act, U.S. Net Operating Losses (NOLs) arising in our calendar tax years

2018,

2019,

and

2020

may

be carried back to each of the

five

tax years preceding the tax year of such loss. Based on this new legislation, in the

first

quarter ended

March 31, 2020,

we have recorded a

$225,000

income tax benefit for NOL carryback. In

July 2020,

we have received our requested NOL carryback refund from the Internal Revenue Service.

The effective income tax rate was (

26.5

)% and

73.9%

for the year to date periods ended

September 30, 2020

and

2019,

respectively. In addition to the CARES Act tax benefit previously described, for each year to date period, the income tax provision amounts include estimated income taxes for

one

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

2019

income tax provision also includes approximately

$25,000

for a

2017

tax year settlement by

one

of our foreign subsidiaries.

Tax Audits

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

ten

years for alleged deficiencies in various tax types for the years

2004

through

2006.

We settled the

2005

and

2006

tax year audits in

November 2019.

In

December 2019,

we had an agreement in principle with the local tax authority to settle the tax year

2004

audit. At

December 31, 2019,

we had an estimated full reserve of approximately

$84,000

for resolution of this matter; with such amount remitted to the tax authority in

February 2020.

During the

third

quarter of

2019,

the U.S. Internal Revenue Service (IRS) commenced an examination of our

2017

U.S. federal income tax return. In

October 2020,

one

of our foreign subsidiaries received notification from its local agency of the agency's intent to commence an examination of its

2019

local country income tax return.