INCOME TAXES

12 Months Ended

Dec. 31, 2020

9. INCOME TAXES

The provision for income taxes is based on income before income taxes as follows (in thousands):


	For the year ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Domestic	$	8,478	$	17,188	$	10,894
Foreign		10,298		6,653		9,787
Income before income taxes	$	18,776	$	23,841	$	20,681

Components of the total provision for income taxes are as follows (in thousands):


	For the year ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Current provision
Domestic	$	2,167	$	4,313	$	1,663
Foreign		3,485		2,618		3,169
Total current provision		5,652		6,931		4,832
Deferred provision
Domestic		288		199		675
Foreign		(807)		(311)		(751)
Total deferred provision		(519)		(112)		(76)
Provision for income taxes	$	5,133	$	6,819	$	4,756

The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows:


	For the year ended
	December 31,		December 31,		December 31,
	2020		2019		2018
Tax provision, computed at statutory rate	21.0	%	21.0	%	21.0	%
State tax, net of federal impact	4.2	%	4.5	%	3.0	%
Change in valuation allowance	0.0	%	0.3	%	2.8	%
Effect of foreign tax rate differences	4.3	%	1.5	%	3.4	%
Permanent items, other	(0.2)	%	1.4	%	0.8	%
Section 162(m) compensation	2.2	%	1.1	%	0.1	%
R&D Credit	(3.6)	%	(2.5)	%	(0.8)	%
Restricted stock awards	0.6	%	(0.1)	%	(2.3)	%
Effect of Tax Cuts and Jobs Act	(1.3)	%	(0.4)	%	(5.1)	%
Subpart F income	1.3	%	0.0	%	0.0	%
Tax examinations	0.0	%	1.8	%	0.0	%
Other	(1.2)	%	0.0	%	0.1	%
Provision for income taxes	27.3	%	28.6	%	23.0	%

The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):


	December 31,		December 31,
	2020		2019
Noncurrent deferred tax assets:
Employee benefit plans	$	2,500	$	2,440
Net operating loss and tax credit carryforwards		2,217		1,675
Accrued expenses and reserves		969		795
Other		697		428
Total noncurrent deferred tax assets		6,383		5,338
Valuation allowance		(1,176)		(1,077)
Net noncurrent deferred tax assets:	$	5,207	$	4,261

Net noncurrent deferred tax liabilities:
Property and equipment	$	3,448	$	3,901
Goodwill and intangibles		5,629		2,885
Other		459		384
Total noncurrent deferred tax liabilities	$	9,536	$	7,170

Net deferred tax asset/(deferred tax liability)	$	(4,329)	$	(2,909)

Presented as follows:
Noncurrent deferred income tax assets	$	330	$	490
Noncurrent deferred income tax liabilities		(4,659)		(3,399)
Net deferred tax liability	$	(4,329)	$	(2,909)

As of December 31, 2020, the Company has the following gross carryforwards available:


			Amount
Jurisdiction	Tax Attribute		(in thousands)	Begin to expire
U.S. State	Net Operating Losses ⁽¹⁾	$	4,139	2024
International	Net Operating Losses ⁽¹⁾	$	1,519	2025
International	Net Operating Losses - Unlimited Carryforward ⁽¹⁾	$	718	No expiration
U.S. Federal	Foreign Tax Credits	$	1,003	2027
International	R&D Tax Credits	$	574	2025

(1)

Net operating losses (NOL’s) are presented as pre-tax amounts.

Realization of the Company’s recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts and Jobs Act in the amount of $0.9 million. The Company determined it is more likely than not that it will not realize a tax benefit from these credits. Additionally, the Company has incurred net operating losses in certain states that it is more likely than not will not be realized. The tax effect of these losses is $0.2 million. Therefore, the Company recognized a full valuation allowance related to these foreign tax credits and state net operating losses.

The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2020.

The Company files income tax returns in various U.S. and foreign taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2017. With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for periods prior to 2017. The Company completed an IRS tax audit for tax year 2017 with no adjustments made to taxable income.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States. Exceptions may be made on a year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States. The Company intends to distribute a portion of these foreign earnings which have been previously taxed in the United States. As of December 31, 2020, foreign withholding taxes of $275 have been provided for unremitted earnings of foreign subsidiaries based on the amounts of anticipated distributions. The Company does not intend to distribute the remaining previously taxed earnings resulting from the one-time transition tax under the Tax Cuts and Jobs Act, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is permanently reinvested, and the determination of any deferred tax liability on this amount is not practicable.

It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense on the consolidated statements of income and comprehensive income. In addition, the Company records uncertain tax positions in accordance with ASC 740. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. The were no uncertain tax benefits for the years ended December 31, 2020, 2019 and 2018 and no amounts were recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2020, 2019, and 2018.