Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

Note 13 – Income Taxes

Income (loss) before income taxes was generated in the following jurisdictions:

	For the year ended December 31,
	2020		2019		2018
U.S.	$	1,046	$	3,223	$	(4,347)
Non-U.S.		(4,466)		11,186		6,956
Total	$	(3,420)	$	14,409	$	2,609

For the years ended December 31, 2020, 2019, and 2018, domestic income excludes intercompany dividend income of $38.0 million, $6.3 million, and $133.3 million, respectively. The provision (benefit) for income taxes consists of the following:

	For the year ended December 31,
	2020		2019		2018
Current:
Federal	$	1,715	$	433	$	(3,792)
State		49		107		97
Foreign		1,758		7,629		10,691
Total current		3,522		8,169		6,996
Deferred:
Federal		1,385		(970)		(333)
State		(24)		24		15
Foreign		(2,848)		(678)		(7,113)
Total deferred		(1,487)		(1,624)		(7,431)
Total	$	2,035	$	6,545	$	(435)

For 2020, 2019, and 2018, our U.S. federal statutory was 21%. The differences between the income tax provisions computed using the statutory federal income tax rate and the provisions for income taxes reported in the consolidated statements of operations are as follows:

	For the year ended December 31,
	2020		2019		2018
Expected tax at statutory rate	$	(718)	$	3,026	$	549
Foreign taxes at other rates		(309)		(914)		(1,252)
Valuation allowances on NOL carryforwards		2,617		2,042		2,894
US tax reform - deemed repatriation		—		—		(2,534)
Global intangible low-taxed income inclusion		339		(27)		23
US tax reform - deferred tax expense from tax rate change		—		—		(462)
State income taxes, net of federal benefit		32		108		(79)
Uncertain tax positions		235		1,845		171
Disallowed expenses and other		(161)		465		255
Total	$	2,035	$	6,545	$	(435)

Significant components of our deferred tax assets and liabilities are as follows:

	As of December 31,
	2020		2019
Deferred tax assets:
Stock and long-term compensation plans	$	2,450	$	2,405
Foreign NOL & other carryforwards		29,267		24,867
US state NOL carryforwards		718		670
Deferred revenue		671		684
Pension liability, net		2,074		1,509
Amortization and depreciation		167		586
Lease liability		3,837		2,807
Accrued expenses and other		1,264		1,013
Total gross deferred tax assets		40,448		34,541
Less: Valuation allowance		(19,992)		(17,255)
Net deferred income tax assets	$	20,456	$	17,286
Deferred tax liabilities:
Accruals	$	286	$	741
Tax on unremitted foreign earnings		1,809		2,058
Right of use asset		3,251		2,124
Intangible assets		6,135		8,046
Tax on credits		2,241		627
Contract acquisition costs		1,616		450
Deferred tax liabilities	$	15,338	$	14,046
Net deferred tax assets (liabilities)	$	5,118	$	3,240

Deferred tax assets and liabilities are netted by tax jurisdiction.

At December 31, 2020, we had foreign and state net operating loss (NOL) carryforwards and other foreign deductible carryforwards as shown in the following table:

	Carryforward		Expiration
NOL Carryforward
Canada	$	46,329	2027-2040
United Kingdom		8,882	None
Other foreign		7,323	None
Canada province		47,310	2027-2040
U.S. states		9,615	2021-2030
		119,459
Other Carryforwards
Canada		29,415	None
Canada province		29,415	None
Capital loss		432	None
Canada (credit)		5,475	2023-2040
		64,737
	$	184,196

The net change in the valuation allowance for the years ended December 31, 2020 and December 31, 2019 were increases of $2.7 million and $2.1 million respectively. Valuation allowances are reviewed on a regular basis and adjustments made as appropriate. The increase in the valuation allowance in 2020 reflects NOLs, other deduction carryforwards, and credits for which the realization is not more likely than not. The change in the valuation allowance also reflects other factors including, but not limited to, changes in our assessment of our ability to use existing NOLs and other deduction carryforwards, changes in currency rates, and adjustments to reflect differences between the actual returns filed and the estimates we made at financial reporting dates. For all other deferred tax assets, the Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

Our policy is to record interest and penalties on income taxes as income tax expense. We provided less than $0.1 million in 2020, $0.2 million in 2019 and less than $0.1 million during 2018.

ASC 740, Income Taxes sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. As of December 31, 2020, 2019, and 2018, we had reserves of $0.5 million, $2.9 million, and $0.4 million, respectively.

	As of year ended December 31,
	2020		2019		2018
Reserve at beginning of year	$	2,923	$	427	$	107
Increases related to prior year tax positions		277		2,500		427
Decreases related to prior year tax positions		(37)		—		—
Lapse of statute of limitations		—		(4)		(107)
Settlement		(2,663)		—		—
Total	$	500	$	2,923	$	427

We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. We are subject to examination of our income tax returns by the IRS and other tax authorities. During the year ended December 31, 2020, we concluded an audit with the Belgian tax authorities which covered income tax returns filed for the years 2015-2018, and entered into a settlement agreement with the Belgian tax authorities covering tax years through 2016. There was no assessment for 2017 and 2018. While we believe the positions we took were supportable under Belgian tax law, in lieu of extending the audit process or pursuing litigation, we negotiated a settlement agreement.

We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Included in the balance of unrecognized tax benefits as of December 31, 2020 is $0.5 million, of tax benefits that, if recognized, would affect the effective tax rate.

We estimate that our unrecognized tax benefits as of December 31, 2020 could decrease by as much as $0.5 million in the next 12 months.

Our primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.

Australia	2012
Austria	2014
Belgium	2016
Canada	2016
Netherlands	2015
Singapore	2015
Switzerland	2019
United Kingdom	2018
United States	2017