Note 10 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10.

Income Taxes

The Company’s quarterly provision for income taxes is based on an estimated effective annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

Income tax expense for the

three

and

six

months ended

June 30, 2018 

was

$204

and

$528,

respectively, on pre-tax losses of

$8,072

and

$16,860,

respectively. As of

June 30, 2018,

the income tax rate varies from the federal income tax rate primarily due to valuation allowances in the United States and taxable income generated by the Company’s foreign wholly owned subsidiaries.

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and, therefore, the need for valuation allowances on a quarterly basis. There is

no

income tax benefit recognized with respect to losses incurred and

no

income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in the Company’s effective tax rate. The Company will maintain the valuation allowances until it is more likely than

not

that the net deferred tax assets will be realized.

Tax positions taken by the Company are subject to audits by multiple tax jurisdictions. The Company accounts for uncertain tax positions and believes that it has provided adequate reserves for its unrecognized tax benefits for all tax years still open for assessment. The Company also believes that it does

not

have any tax position for which it is

not

reasonably possible that the total amounts of uncertain tax positions will significantly increase or decrease within the next year. For the

three

and

six

months ended

June 30, 2018

and

2017,

the Company did

not

recognize any interest or penalties related to uncertain tax positions.

The Tax Cuts and Jobs Act

On

December 22, 2017,

the United States enacted the TCJA, which instituted fundamental changes to the taxation of multinational corporations, including, but

not

limited to: (

1

) a reduction of the U.S. federal corporate income tax rate from

35%

to

21%

for tax years beginning after

December 31, 2017; (

2

) the creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”) tax and (

3

) the transition of international taxation from a worldwide tax system to a modified territorial system, which will result in a

one

time U.S. tax liability on those earnings which have

not

previously been repatriated to the U.S. (“Transition Tax”).

As a result of the reduced corporate income tax rate, the Company re-measured its deferred tax assets and liabilities and reduced them by

$18,696

and

$4,394,

respectively, with a corresponding net adjustment to the valuation allowance of

$14,302

for the year ended

December 31, 2017.

The BEAT provisions in the TCJA essentially represent a

10%

minimum tax (

5%

for tax years beginning after

December 31, 2017,

increasing to

10%

for years beginning after

December 31, 2018)

calculated on a base equal to taxpayer’s income determined without tax benefits arising from base erosion payments. BEAT does

not

apply to corporations with annual gross receipts for the

three

-taxable-year period, ending with the preceding taxable year, of less than

$500,000.

As a result, BEAT does

not

apply to the Company for the year ending

December 31, 2018.

In addition, the TCJA imposes a U.S. tax on GILTI that is earned by certain foreign subsidiaries. Due to the complexity of the GILTI tax rules, the Company’s accounting for GILTI is incomplete. The Company has

not

made any provisional adjustment related to potential GILTI tax on its condensed consolidated financial statements, and has

not

made a policy decision regarding whether to record deferred taxes related to GILTI.

The Transition Tax is imposed on previously untaxed historical earnings and profits of foreign subsidiaries. Based on the current evaluation of the Company’s operations,

no

repatriation tax charge is anticipated due to negative earnings and profits in the Company’s foreign subsidiaries.

The SEC staff issued SAB

118

to address the application of GAAP in situations when a registrant does

not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. For the

three

months ended

June 30, 2018,

the accounting for the TCJA remained incomplete, but there were

no

material changes to the provisional tax impacts assessed for the year ended

December 31, 2017.

The accounting is expected to be completed when the Company’s

2017

U.S. corporate income tax is filed in

2018.

As of

June 30, 2018,

the amounts recorded or anticipated for the TCJA remain provisional for the Transition Tax, the re-measurement of deferred taxes, the reassessment of permanently reinvested earnings uncertain tax positions and valuation allowances. These estimates

may

be impacted by further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations and state tax conformity to federal tax changes, among other factors.