Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

H. Income Taxes

The Company periodically undertakes a review of its valuation allowance and evaluates all positive and negative factors that may affect whether it is more likely than not that the Company would realize its future tax benefits from its deferred tax balances. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.

During 2021, the Company released its valuation allowance over a portion of its deferred tax assets as the deferred tax assets became more likely than not to be realized.

Income tax provision (benefit) for the years ended December 31, 2021 and 2020 is as follows:

	2021			2020
	(in thousands)
Current:
Federal	$	860		$	—
State and local		116			31
Foreign		—			50
Total Current		976			81
Deferred:
Federal		3,188			238
State and local		332			(6	)
Foreign		1			32
Total before change in valuation allowance		3,521			264
Change in valuation allowance		(379	)		(9	)
Net deferred		3,142			255
Income tax provision	$	4,118		$	336

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to income before income taxes is detailed below:

	2021			2020
	(in thousands)
Tax provision at expected statutory rate	$	3,939		$	274
State taxes, net of federal benefit		448			31
Permanent differences		(271	)		45
Tax credits		(116	)		(125	)
Tax credit expiration		—			132
Foreign tax expense, and other		(7	)		1
Change in rate		—			(38	)
Change in valuation allowance		(379	)		(9	)
Change in uncertain tax positions		458			—
Provision to return		13			15
Other		33			10
Provision for income taxes	$	4,118		$	336
Effective tax rate		22.0	%		25.8	%

Deferred income taxes for 2021 and 2020 were provided for the temporary differences between the financial reporting basis and the income tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carryforwards at December 31, 2021 and 2020 were as follows:

	December 31, 2021					December 31, 2020
	Deferred Tax					Deferred Tax
	Asset			Liability		Asset			Liability
	(in thousands)
Inventory reserve	$	345		$	—	$	286		$	—
Fixed assets		—			44		—			58
Other reserves and accruals		262			—		338			—
Unrealized gains on marketable securities		—			1,024		—			27
Stock-based compensation		2			—		8			—
Other		—			6		—			12
Tax credit carryforwards		318			—		1,717			—
Federal tax loss carryforwards		—			—		892			—
State tax loss carryforwards		23			—		252			—
Foreign tax loss carryforwards		34			—		35			—
Total deferred income taxes		984		$	1,074		3,528		$	97
Valuation allowance		—					(379	)
Net deferred tax (liabilities) assets	$	(90	)			$	3,052

Deferred tax liability totaled $90,000 at December 31, 2021 which includes the tax effect of state and foreign NOL carryforwards. We recognize federal, state and foreign NOL carryforwards and our federal tax credits as deferred tax assets, subject to any required valuation allowance.

Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of a global business, there are many transactions for which the ultimate tax outcome is uncertain. We review our tax contingencies on a regular basis and make appropriate accruals as necessary.

As of December 31, 2021, our unrecognized tax benefits totaled $458,000, and are included within other liabilities in our consolidated balance sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2021
	(in thousands)
Balance at January 1	$	—
Additions for tax positions of prior years		429
Additions based on tax positions related to the current year		29
Balance at December 31	$	458

The Company will recognize any interest and penalties related to unrecognized tax positions in income tax expense. Net adjustments to accruals for interest and penalties associated with uncertain tax positions was immaterial for 2021. Our total accrued interest and penalties associated with uncertain tax positions were immaterial as of December 31, 2021. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $458,000. We do not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. We believe that the taxes accrued in our consolidated balance sheet fairly represent the amount of income taxes to be settled or realized in the future.

The Company files income tax returns in the U.S. federal, various state, Hong Kong and India jurisdictions. The statute of limitations for assessment by the Internal Revenue Service ("IRS") and state tax authorities is open for tax returns for years ended December 31, 2018, 2019 and 2020; although carryforward attributes that were generated prior to tax year 2018, including NOL carryforwards and tax credits, may still be adjusted upon examination by the IRS or state tax authorities, if they either have been or will be used in a future period. The Company is generally subject to examinations by foreign tax authorities from 2016 to the present.