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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of the Company’s income before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):
20212020
United States$6,947 $4,934 
Foreign1,945 791 
Income before income taxes$8,892 $5,725 

The components of the Company’s income tax provision (benefit) for the years ended December 31 (in thousands):
Current provision (benefit):20212020
Federal$(17)$(1,086)
State(161)114 
Foreign956 716 
778 (256)
Deferred provision (benefit):
Federal(1,183)— 
State(131)— 
Foreign(414)(280)
(1,728)(280)
$(950)$(536)
For the years ended December 31, 2021 and 2020, the Company’s effective tax rate was (10.7)% and (9.4)%, respectively. The Company's effective tax rate for the year ended December 31, 2021 differed from the statutory rate due to the release of valuation allowance on U.S. deferred tax assets due to the expectation of current and future utilization. The Company's effective tax rate for the year ended December 31, 2020 differed from the statutory rate due to the carryback of U.S net operating losses as allowed by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), enacted on March 27, 2020.
A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:
20212020
Federal statutory income taxes21.0 %21.0 %
State income taxes, net of federal benefit0.8 2.9 
Difference in foreign and United States tax on foreign operations0.7 1.9 
Effect of changes in valuation allowance(45.0)(7.7)
CARES NOL Carryback Benefit— (25.3)
Foreign Derived Intangible Income (FDII) deduction(8.1)(6.6)
Global Intangible Low Taxed Income (GILTI)(1)
— (7.3)
Foreign Charitable Contributions0.7 1.4 
Prior year adjustments1.3 8.2 
Withholding taxes2.5 3.2 
Changes to uncertain tax positions(1.8)— 
Expiration of tax attribute17.4 — 
Other(0.2)(1.1)
(10.7)%(9.4)%
(1)This amount relates to the reversal of the 2018 GILTI inclusion due to the GILTI high-tax election the IRS made available in Q3 2020.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):
Deferred tax assets:20212020
Deferred Revenue$409 $317 
Inventory235 343 
Accrued expenses1,352 1,034 
Net operating loss (1)
5,310 7,078 
Equity Compensation242 296 
Foreign tax credit carryover3,436 4,615 
Lease liability763 922 
Other664 443 
Total deferred tax assets$12,411 $15,048 
Valuation allowance(7,934)(11,933)
Total deferred tax assets, net of valuation allowance$4,477 $3,115 
Deferred tax liabilities:
Prepaid expenses111 131 
Deferred commissions450 305 
Internally-developed software104 237 
Lease assets717 884 
Fixed assets270 383 
Total deferred tax liabilities$1,652 $1,940 
Total net deferred tax asset$2,825 $1,175 

(1)The Company’s net operating loss will expire as follows (dollar amounts in thousands):
JurisdictionGross NOLTax Effected NOLExpiration Years
Australia$148 $44 Indefinite
Bermuda63 — N/A
China606 151 2024-2026
Colombia1,654 496 Indefinite
Cyprus1,371 171 2026
Gibraltar216 — Indefinite
Mexico6,313 1,894 2022-2028
Norway310 68 Indefinite
Russia
8 2 Indefinite
Singapore147 25 Indefinite
South Africa646 181 Indefinite
Sweden456 94 Indefinite
Switzerland6,765 622 2022-2028
Taiwan3,422 684 2022-2031
Ukraine
9 2 Indefinite
United Kingdom339 64 Indefinite
United States - State13,574 812 2022-Indefinite
                
We have U.S. foreign tax credit carryforwards of $3.4 million as of December 31, 2021, which will begin to expire in 2024. The Company maintains a valuation allowance of $2.7 million against its foreign tax credit carryforwards.

At December 31, 2021 and 2020, the Company’s valuation allowance was $7.9 million and $11.9 million, respectively. The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing a deferred tax asset cannot be met. A company is to use judgment in reviewing both positive and negative evidence of realizing a deferred tax asset. Furthermore, the weight given to the potential effect of such evidence is commensurate with the extent the evidence can be objectively verified. The valuation allowance against the Company's deferred tax assets consisted of the following at December 31 (in millions):
Country20212020
Australia $— $0.2 
China0.5 0.4 
Colombia0.5 0.6 
Cyprus0.2 0.2 
Mexico1.9 3.1 
Norway0.1 0.1 
South Africa0.2 0.2 
Switzerland0.5 0.5 
Taiwan0.6 1.1 
United States3.4 5.5 
Total$7.9 $11.9 

U.S. Tax
Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets at December 31 as follows (in thousands):
20212020
Deferred tax assets$2,828 $1,178 
Deferred tax liabilities(3)(3)
Net deferred tax assets$2,825 $1,175 

As of December 31, 2021, the Company had no unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows, for the years ended December 31, 2021 and 2020 (in thousands):
 20212020
Balance as of January 1$79 $79 
Additions for tax positions related to the current year— — 
Additions for tax positions of prior years— — 
Reductions of tax positions of prior years— — 
Settlements(79)— 
Balance as of December 31$— $79 

The Company recognizes interest and/or penalties related to uncertain tax positions in current income tax expense. As of December 31, 2021, the Company had no accrued interest and penalties in the consolidated balance sheet or the consolidated statement of operations. As of December 31, 2020, the Company had accrued interest and penalties of $0.1 million in the consolidated balance sheet, of which $11 thousand were expensed in the consolidated statement of operations. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase or decrease within the next twelve months due to uncertainties regarding the timing of any examinations, the Company does not expect its unrecognized tax benefits to decrease during the next twelve months.
The Company is subject to examination by taxing authorities in the United States and various state and foreign jurisdictions. As of December 31, 2021, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:
JurisdictionOpen Years
Australia2013-2020
Japan2017-2020
Republic of Korea2017-2020
Switzerland2017-2020
United States2018-2020
The IRS has opened an audit for tax year 2019. Audit work has not yet been scheduled so it is impossible to estimate any additional tax liability or penalty that could result from the audit. We have not accrued a liability related to this audit at this time.