Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

7.  Income Taxes

The amounts of income tax expense (benefit) reflected in operations is as follows:

	2015			2014
Current:
Federal	$	1,304,253		$	1,063,043
State		164,913			171,003
Foreign		553,259			572,660
		2,022,425			1,806,706
Deferred:
Federal		(196,476	)		184,616
State		(5,077	)		22,398
		(201,553	)		207,014
	$	1,820,872		$	2,013,720

The current state tax provision was comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located.

A summary of United States and foreign income before income taxes follows:

	2015		2014
United States	$	3,256,251	$	3,877,541
Foreign		3,358,146		2,925,184
	$	6,614,397	$	6,802,725

As discussed in Note 10 below, for segment reporting, Direct Import sales are included in the United States segment. However, the revenues are earned by our Hong Kong subsidiary and related income taxes are paid in Hong Kong whose rate approximates 16.5%. As such, income of the Asian subsidiary is included in the foreign income before taxes.

	2015			2014
Federal income
taxes at
34% statutory rate	$	1,878,464		$	2,203,901
State and local
taxes, net of
federal income
tax effect		105,492			131,505
Permanent items		328,075			11,693
Foreign tax rate difference		(601,269	)		(471,469	)
Change in deferred income tax
valuation allowance		110,110			138,090
Provision for income taxes	$	1,820,872		$	2,013,720

The following summarizes deferred income tax assets and liabilities:

	2015			2014
Deferred income tax liabilities:
Plant, property
and equipment	$	536,759		$	469,247
		536,759			469,247
Deferred income tax assets:
Asset valuations		677,994			608,905
Operating loss
carryforwards and credits		110,110			138,090
Pension		189,920			166,625
Foreign tax credit		186,504			28,049
Other		753,219			734,993
		1,917,747			1,676,662
Net deferred
income tax asset before valuation allowance		1,380,988			1,207,415
Valuation
allowance		(110,110	)		(138,090	)
Net deferred
income tax asset	$	1,270,878		$	1,069,325

In 2015, the Company evaluated its tax positions for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company’s evaluation of uncertain tax positions was performed for the tax years ended December 31, 2013 and forward, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2015.

In accordance with the Company’s accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested. Earnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends. During 2015, the Company repatriated a total of $2.5 million of foreign earnings from its Hong Kong subsidiary. This repatriation was part of a two year plan which the Company started in 2014. During 2014, the Company repatriated a total of $11.8 million of foreign earnings, consisting of $10.5 million from its Hong Kong subsidiary and $1.3 million from its Canadian subsidiary. The repatriation related to the funding of the Company’s acquisition of certain assets of First Aid Only, Inc. U.S. income taxes on those repatriated earnings have been partially offset by foreign tax credits. The Company plans to repatriate future earnings of its Canadian subsidiary and will provide for U.S. income taxes accordingly. Foreign subsidiary earnings of $3,157,020 and $3,177,348 are considered permanently reinvested as of December 31, 2015 and 2014, respectively, and no deferred income taxes have been provided on these foreign earnings. These unremitted foreign earnings are related to the Hong Kong Subsidiary, and there is no unrecognized deferred income tax liability for these permanently reinvested earnings.

Due to the uncertain nature of the realization of the Company's deferred income tax assets based on past performance of its German subsidiary and carry forward expiration dates, the Company has recorded a valuation allowance for the amount of deferred income tax assets which are not expected to be realized. This valuation allowance, all of which is related to deferred tax assets resulting from net operating losses of the Company’s German subsidiary, is subject to periodic review, and if the allowance is reduced, the tax benefit will be recorded in future operations as a reduction of the Company's tax expense.