Income Taxes

12 Months Ended

Dec. 30, 2023

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:

	2023			2022
Property, plant, and equipment	$	3,897,991		$	3,568,209
Right of Use Asset		4,192,368			2,786,486
Intangible assets		1,674,225			3,374,192
Other		369,358			876,731
Foreign Withholding Tax		-			60,462
Total deferred income tax liabilities		10,133,942			10,666,080
Other postretirement benefits		(139,050	)		(151,486	)
Inventories		(1,587,374	)		(1,562,175	)
Allowance for doubtful accounts		(133,988	)		(160,446	)
Accrued compensation		(434,631	)		(498,530	)
Lease Obligation		(4,192,368	)		(2,786,486	)
Pensions		(4,819,568	)		(5,042,030	)
Foreign Tax Credit		(1,110,534	)		(953,916	)
Total deferred income tax assets		(12,417,513	)		(11,155,069	)
Net deferred income tax (assets) liabilities	$	(2,283,571	)	$	(488,989	)

Income before income taxes consists of:

	2023						2022
	Continuing Operations		Discontinued Operations		Total Income Statement		Continuing Operations		Discontinued Operations		Total Income Statement
Domestic	$	8,351,677		-	$	8,351,677	$	12,787,773	$	1,666,312	$	14,454,085
Foreign		2,640,266		-		2,640,266		1,615,144		-		1,615,144
	$	10,991,943		-	$	10,991,943	$	14,402,917	$	1,666,312	$	16,069,229

The provision for income taxes follows:

	2023								2022
	Continuing Operations			Discontinued Operations		Total Income Statement			Continuing Operations			Discontinued Operations		Total Income Statement
Current
Federal	$	2,558,279			-	$	2,558,279		$	4,528,423		$	332,665	$	4,861,088
Foreign		967,152			-		967,152			572,555			-		572,555
State		503,738			-		503,738			1,361,461			82,190		1,443,651
Deferred:
Federal		(1,371,310	)		-		(1,371,310	)		(2,567,573	)		-		(2,567,573	)
Foreign		(60,462	)		-		(60,462	)		-			-		-
State		(190,457	)		-		(190,457	)		(542,410	)		-		(542,410	)
	$	2,406,940			-	$	2,406,940		$	3,352,456		$	414,855	$	3,767,311

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

	2023						2022
	Amount			Percent			Amount			Percent
Income taxes using U.S. federal statutory rate	$	2,308,308			21	%	$	3,374,538			21	%
State income taxes, net of federal benefit		244,874			2			714,416			4
Impact on Foreign Repatriation Tax Reform		306,330			3			-			0
Impact of foreign subsidiaries on effective tax rate		(297,728	)		(3	)		(41,404	)		0
Impact of Research & Development tax credit		(136,343	)		(1	)		(131,005	)		(1	)
Uncertain tax positions reserve		461			0			54,705			0
Other net		(18,962	)		0			(203,939	)		(1	)
	$	2,406,940			22	%	$	3,767,311			23	%

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

	2023						2022
	Amount			Percent			Amount			Percent
Income taxes using U.S. federal statutory rate	$	2,308,308			21	%	$	3,024,612			21	%
State income taxes, net of federal benefit		244,874			2			649,486			4
Impact on Foreign Repatriation Tax Reform		306,330			3			-			0
Impact of foreign subsidiaries on effective tax rate		(297,728	)		(3	)		(41,404	)		0
Impact of Research & Development tax credit		(136,343	)		(1	)		(131,005	)		(1	)
Uncertain tax positions reserve		461			0			54,705			0
Other net		(18,962	)		0			(203,938	)		(1	)
	$	2,406,940			22	%	$	3,352,456			23	%

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

	2023					2022
	Amount		Percent			Amount		Percent
Income taxes using U.S. federal statutory rate		-		0	%	$	349,925		21	%
State income taxes, net of federal benefit		-		0			64,930		4
	$	-		0	%	$	414,855		25	%

Total income taxes paid were $6,608,084 in 2023 and $3,679,678 in 2022.

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 30, 2023 on approximately $11,507,000 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.

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures which applies to all entities subject to income taxes. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently in the process of evaluating the effect of this guidance on its financial statements.

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

	2023			2022
Balance at beginning of year	$	685,518		$	672,098
Increase for positions taken during the current period		34,293			58,586
Increase (decrease) for positions taken during the prior period		(59,779	)		-
Decrease resulting from the expiration of the statute of limitations		(88,168	)		(45,166	)
Balance at end of year	$	571,864		$	685,518

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 2019 and non-U.S. income tax examinations by tax authorities prior to 2017.

Included in the balance as of December 30, 2023, are $451,772 of unrecognized tax benefits that would affect the annual effective tax rate. In 2023, the Company recognized accrued interest related to unrecognized tax benefits in income tax expense. The Company had approximately $69,830 of accrued interest as of December 30, 2023.

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.