Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

8. Income Taxes

8. Income Taxes

Deferred income taxes are provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for income tax reporting purposes. Deferred income tax (assets) liabilities relate to:

	2022			2021
Property, plant and equipment	$	3,568,209		$	3,586,257
Right of Use Asset		2,786,486			2,564,741
Intangible assets		3,374,192			6,364,038
Other		876,731			495,881
Foreign Withholding Tax		60,462			60,462
Total deferred income tax liabilities		10,666,080			13,071,379
Other postretirement benefits		(151,486	)		(292,090	)
Inventories		(1,562,175	)		(1,161,354	)
Allowance for doubtful accounts		(160,446	)		(114,113	)
Accrued compensation		(498,530	)		(390,693	)
Lease Obligation		(2,786,486	)		(2,564,741	)
Pensions		(5,042,030	)		(6,049,532	)
Foreign Tax Credit		(953,916	)		(1,164,515	)
Capital Loss Carry forward		-			(182,582	)
Total deferred income tax assets		(11,155,069	)		(11,919,620	)
Net deferred income tax (assets) liabilities	$	(488,989	)	$	1,151,759

Income before income taxes consists of:

	2022						2021
	Continuing Operations		Discontinued Operations		Total Income Statement		Continuing Operations		Discontinued Operations			Total Income Statement
Domestic	$	12,787,773	$	1,666,312	$	14,454,085	$	14,574,811	$	(8,936,924	)	$	5,637,887
Foreign		1,615,144		-		1,615,144		4,495,749		-			4,495,749
	$	14,402,917	$	1,666,312	$	16,069,229	$	19,070,560	$	(8,936,924	)	$	10,133,636

The provision for income taxes follows:

	2022								2021
	Continuing Operations			Discontinued Operations		Total Income Statement			Continuing Operations			Discontinued Operations			Total Income Statement
Current
Federal	$	4,528,423		$	332,665	$	4,861,088		$	4,075,121		$	(1,816,413	)	$	2,258,708
Foreign		572,555			-		572,555			1,509,693			(287,339	)		1,222,354
State		1,361,461			84,190		1,443,651			498,939			-			498,939
Deferred:
Federal		(2,567,573	)		-		(2,567,573	)		(2,292,101	)		-			(2,292,101	)
Foreign		-			-		-			(189,970	)		-			(189,970	)
State		(542,410	)		-		(542,410	)		(713,465	)		-			(713,465	)
	$	3,352,456		$	414,855	$	3,767,311		$	2,888,217		$	(2,103,752	)	$	784,465

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:

	2022						2021
	Amount			Percent			Amount			Percent
Income taxes using U.S. federal statutory rate	$	3,374,538			21	%	$	2,128,063			21	%
State income taxes, net of federal benefit		714,416			4			(165,221	)		(2	)
Impact on Foreign Repatriation Tax Reform		-			0			11,313			0
Impact of foreign subsidiaries on effective tax rate		(41,404	)		0			(282,614	)		(3	)
Impact of Research & Development tax credit		(131,005	)		(1	)		(188,944	)		(3	)
Uncertain tax positions reserve		54,705			0			(417,197	)		(3	)
Other net		(203,939	)		(1	)		(300,935	)		(3	)
	$	3,767,311			23	%	$	784,465			7	%

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows for continuing operations:

	2022						2021
	Amount			Percent			Amount		Percent
Income taxes using U.S. federal statutory rate	$	3,024,612			21	%	$	4,004,817		21	%
State income taxes, net of federal benefit		649,486			4			61,777		1
Impact on Foreign Repatriation Tax Reform		-			0			11,313		0
Impact of foreign subsidiaries on effective tax rate		(41,404	)		0			(282,614		(2	)
Impact of Research & Development tax credit		(131,005	)		(1	)		(188,944		(1	)
Uncertain tax positions reserve		54,705			0			(417,197		(2	)
Other net		(203,938	)		(1	)		(300,935		(2	)
	$	3,352,456			23	%	$	2,888,217		15	%

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows for discontinued operations:

	2022					2021
	Amount		Percent			Amount			Percent
Income taxes using U.S. federal statutory rate	$	349,925		21	%	$	(1,876,754	)		21	%
State income taxes, net of federal benefit		64,930		4			(226,998	)		3
	$	414,855		25	%	$	(2,103,752	)		24	%

Total income taxes paid were $3,679,678 in 2022 and $2,318,018 in 2021.

Under accounting standards (ASC 740), a deferred tax liability is not recorded for the excess of the financial reporting (book) basis over the tax basis of an investment in a foreign subsidiary if the indefinite reinvestment criteria are met. Effective for foreign earnings after December 30, 2017, if such earnings are distributed in the form of cash dividends, the Company would not be subject to additional U.S. income taxes but could be subject to foreign income and withholding taxes. A provision has not been made for additional U.S. federal and foreign taxes on December 31, 2022 on approximately $12,218,919 of undistributed earnings of foreign subsidiaries because the Company intends to reinvest these funds indefinitely. It is not practicable to estimate the unrecognized deferred tax liability for withholding taxes on these undistributed earnings.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive. The changes include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses and exceptions to deferred tax liability recognition related to foreign subsidiary investments. In addition, ASU 2019-12 requires that entities recognize franchise tax based on an incremental method, requires an entity to evaluate the accounting for step-ups in the tax basis of goodwill as inside or outside of a business combination, and removes the requirement to allocate the current and deferred tax provision among entities in standalone financial statement reporting. The ASU also now requires that an entity reflect enacted changes in tax laws in the annual effective rate, and other Codification adjustments have been made to employee stock ownership plans. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2019-12 in the first interim period of 2021.

A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:

	2022			2021
Balance at beginning of year	$	672,098		$	1,078,309
Increase for positions taken during the current period		58,586			45,721
Increase (decrease) for positions taken during the prior period		-			-
Decrease resulting from the expiration of the statute of limitations		(45,166	)		(451,932	)
Balance at end of year	$	685,518		$	672,098

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2018 and non-U.S. income tax examinations by tax authorities prior to 2016.

Included in the balance as of December 31, 2022, are $253,655 of unrecognized tax benefits that would affect the annual effective tax rate. In 2022, the Company recognized accrued interest related to unrecognized tax benefits in income tax expense. The Company had approximately $69,245 of accrued interest as of December 31, 2022.

The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for several reasons, including the closure of federal, state, and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under ASC 740. The Company believes that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.