Income Taxes

3 Months Ended

Mar. 31, 2022

Income Taxes [Abstract]

Income Taxes

Note 13 - Income Taxes

The following table shows the provision for (benefit from) income taxes and our effective tax rates:

(in thousands)	Three months ended
	March 31, 2022				March 31, 2021
Income (loss) before income taxes		$	(3,267	)		$	(2,240	)
Provision for income taxes			167				(35	)
Effective tax rate			(5.1	)%			1.6	%

Our income tax expense or benefit for the interim periods presented is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. Total income tax expense for the three months ended March 31, 2022 was comprised mainly of current foreign and state tax expense, as well as deferred federal and state tax expense related to the portion of goodwill which cannot be offset by deferred tax assets. Total income tax benefit for the three months ended March 31, 2021 was comprised mainly of foreign tax benefit, partially offset by state tax expense.

Our income effective tax rate was (5.1)% and 1.6% for the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, the difference between our income tax expense at an effective tax rate of (5.1)% and a benefit at the U.S. statutory federal income tax rate of 21% a change in valuation allowance in our U.S. entity, the permanent disallowance of interest expense related to disqualified debt, accruals related to uncertain tax positions for certain foreign tax contingencies, and discrete item adjustments for U.S. and foreign taxes. For the three months ended March 31, 2021, the difference between income tax benefit at an effective tax rate of 1.6% and a benefit at the U.S. statutory federal income tax rate of 21% was primarily due to accruals related to uncertain tax positions for certain foreign tax contingencies, a change in tax valuation allowance in our U.S. and China subsidiaries, and discrete item adjustments for U.S. and foreign taxes.

Because of our net operating loss carryforwards, we are subject to U.S. federal and state income tax examinations from the year 2000 and forward and are subject to foreign tax examinations by tax authorities for years 2016 and forward.

An uncertain tax position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Interest and penalties related to income taxes are accounted for as income tax expense.

We recognize deferred tax assets to the extent that it is believed that these assets are more likely than not to be realized. We have evaluated all positive and negative evidence and determined that it will continue to assess a full valuation allowance on our U.S., Chinese, and Slovakian net deferred assets as of March 31, 2022. We have determined that it is not more likely than not that the Company will realize the benefits of its deferred taxes in the U.S. and foreign jurisdictions. The Company has a deferred tax liability in the amount of $148 thousand at March 31, 2022 related to the portion of Goodwill which cannot be offset by deferred tax assets.