Note 11 - Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

We account for income taxes in accordance with the accounting standard for "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences.

A breakdown of our income tax expense (benefit) for the years ended December 31 is as follows:

($ in thousands)	2021			2020
Federal:
Current	$	1,554		$	4,942
Deferred		1,729			67
Total Federal		3,283			5,009
State & local:
Current		833			793
Deferred		(176	)		97
Total State & local		657			890
Foreign
Current		907			102
Deferred		(37	)		-
Total Foreign		870			102
Total	$	4,810		$	6,001

A reconciliation of recorded Federal income tax expense to the expected expense computed by applying the applicable Federal statutory rate for all periods to income before income taxes follows:

	Year Ended December 31,
($ in thousands)	2021			2020
Expected expense at statutory rate	$	5,327		$	5,662
Increase (decrease) in income taxes resulting from:
Exempt income from Dominican Republic operations due to tax holiday		(1,238	)		(942	)
Tax Rate Differential effect of Foreign Operations		45			-
Tax on repatriated earnings from Dominican Republic operations		941			438
State and local income taxes		222			766
Foreign Tax Credit		(547	)		(30	)
Meals and entertainment		2			27
Nondeductible penalties		3			20
Provision to return filing adjustments and other		55			60
Total	$	4,810		$	6,001

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2021 and 2020 consist of the following:

($ in thousands)	2021		2020
Deferred tax assets:
Asset valuation allowances and accrued expenses	$	239	$	301
Inventories		1,564		528
State and local income taxes		346		169
Pension and deferred compensation		38		18
Net operating losses		302		298
Lease asset		2,696		269
Total deferred tax assets		5,185		1,583
Valuation allowances		-		(298	)
Total deferred tax assets		5,185		1,285
Deferred tax liabilities:
Fixed assets		4,144		1,571
Intangible assets		7,179		6,587
Other assets		317		278
Tollgate tax on Lifestyle earnings		228		228
State and local income taxes		1,001		623
Lease Liability		2,609		269
Total deferred tax liabilities		15,478		9,556
Net deferred tax liability	$	10,293	$	8,271

The valuation allowance as of December 31, 2020 is related to certain state and local income tax net operating loss carry forwards.

We have provided Puerto Rico tollgate taxes on approximately $3,684,000 of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994, that would be payable if such earnings were repatriated to the United States. In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to June 30, 1994, thus no other provision for tollgate tax has been made on earnings after that date. If we repatriate the earnings from Lifestyle, $227,563 of tollgate tax would be due as of December 31, 2021.

We are subject to tax examinations in various taxing jurisdictions. The earliest exam years open for examination are as follows:

	Earliest Exam Year
Taxing Authority Jurisdiction:
U.S. Federal	2018
Various U.S. States	2017
Puerto Rico (U.S. Territory)	2016
Canada	2016
China	2018
Mexico	2021
United Kingdom	2021
Australia	2021

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2021, no such expenses were recognized during the year. We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.  Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the standard.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations.