Note 15 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15.   INCOME TAXES

Generally, the Company’s relative income or loss generated in each of its jurisdictions can materially impact the consolidated effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income, versus United States pretax income. The consolidated effective income tax rate for fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021 were 26.7%, 21.0% and 26.4%, respectively.  The Company’s United States Federal statutory tax rate for fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021, before any adjustments, was 21.0%.  The income tax provisions reconciled to the tax computed at the United States Federal statutory rate for fiscal years 2022, 2021 and 2020 are as follows:

	December 31, 2022			January 1, 2022			January 2, 2021
Federal statutory rate		21.0	%		21.0	%		21.0	%
Tax expense on taxable (loss) income at federal statutory rate	$	5,981		$	2,922		$	(2,532	)
State and Puerto Rico income taxes, net of Federal income tax benefit		1,373			519			(535	)
Permanent differences domestic		(52	)		(114	)		154
Permanent differences foreign		-			(657	)		-
Excess tax deduction over GAAP deduction for equity awards vested in current year		161			-			-
Remeasurement of contingent consideration		-			(359	)		-
Intangible asset deferred tax liability true-up		-			491			-
Foreign income tax rates		15			89			(21	)
Adjustments to prior year federal taxes		-			46			(53	)
Other		113			(12	)		(201	)
Total income tax expense (benefit)	$	7,591		$	2,925		$	(3,188	)

The components of income tax expense (benefit) are as follows:

	Fiscal Years Ended
	December 31, 2022		January 1, 2022			January 2, 2021
Current
Federal	$	2,962	$	47		$	(32	)
State and local		1,020		45			174
Foreign		359		292			382
		4,341		384			524
Deferred
Federal		2,507		2,152			(2,844	)
State		718		612			(851	)
Foreign		25		(223	)		(17	)
		3,250		2,541			(3,712	)
Total	$	7,591	$	2,925		$	(3,188	)

The components of earnings (loss) before income taxes by United States and foreign jurisdictions were as follows:

	Fiscal Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
United States	$	26,722	$	10,880	$	(13,898	)
Foreign jurisdictions		1,758		3,034		1,841
	$	28,480	$	13,914	$	(12,057	)

A reconciliation of the unrecognized tax benefits for the year December 31, 2022:

Unrecognized Tax Benefits
Balance as of December 28, 2019
Gross increases: tax positions in prior period	$	-
Gross increases: tax positions in current period	$	-
Balance as of January 2, 2021	$	-
Gross increases: tax positions in prior period	$	-
Gross increases: tax positions in current period	$	1,196
Balance as of January 1, 2022	$	1,196
Gross increases: tax positions in prior period	$	-
Gross increases: tax positions in current period	$	-
Balance as of December 31, 2022	$	1,196

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will not change during the next 12 months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future.

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to interest expense.  The Company recorded no expense for penalties or interest in the fiscal years ended December 31, 2022, January 1, 2022 and January 2, 2021.

At December 31, 2022, January 1, 2022 and January 2, 2021, deferred tax assets and liabilities consist of the following:

	December 31, 2022			January 1, 2022			January 2, 2021
Deferred tax assets:
Allowance for doubtful accounts	$	270		$	297		$	455
Federal and state net operating loss carryforward		-			1,153			2,634
Reserves and accruals		851			800			881
Lease liability		1,118			844			1,174
Other		220			314			318
Total deferred tax assets		2,459			3,408			5,462
Deferred tax liabilities:
Acquisition amortization, net		(1,696	)		(1,428	)		(716	)
Prepaid expense deferral		(872	)		(552	)		(602	)
Bonus depreciation to be reversed		(433	)		(392	)		(280	)
Right of use assets		(953	)		(501	)		(564	)
Canada deferred tax liability, net		(166	)		(142	)		(365	)
Total deferred tax liabilities		(4,120	)		(3,015	)		(2,527	)
Total deferred tax (liabilities) assets, net		(1,661	)	$	393		$	2,935

The Company no longer has any operating losses to carry forward.

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states.  The Company has no open federal audits as of December 31, 2022. The Company is no longer subject to audits by state and local tax authorities for tax years prior to 2019. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2019. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2012. The Company has no open state audits as of December 31, 2022.

Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company. The actual 2022 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards.

Under APB 23, foreign earnings are generally not subject to US tax until repatriated or deemed repatriated under the anti-deferral rules.  The Company has determined that as of December 31, 2022, all current and future earnings in its foreign subsidiaries will be permanently reinvested.   Based on this determination, the anti-deferral rules have no material impact on the Company.