Note 15 - Income Taxes

12 Months Ended

Dec. 30, 2023

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 30, 2023, December 31, 2022 and January 1, 2022 were 24.2%, 26.7% and 21.0%, respectively.  The Company’s United States Federal statutory tax rate for fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022, 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 2023, 2022 and 2021 are as follows:

	December 30, 2023			December 31, 2022			January 1, 2022
Federal statutory rate		21.0	%		21.0	%		21.0	%
Tax expense on taxable income at federal statutory rate	$	4,661		$	5,981		$	2,922
State and Puerto Rico income taxes, net of Federal income tax benefit		1,082			1,373			519
Permanent differences domestic and foreign		(269	)		109			(771	)
Foreign income tax rates		25			15			89
Other		(135	)		113			(166	)
Total income tax expense	$	5,364		$	7,591		$	2,925

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

	Fiscal Years Ended
	December 30, 2023			December 31, 2022		January 1, 2022
Current
Federal	$	3,055		$	2,962	$	47
State and local		1,608			1,020		45
Foreign		660			359		292
		5,323			4,341		384
Deferred
Federal		217			2,507		2,152
State		(143	)		718		612
Foreign		(33	)		25		(223	)
		41			3,250		2,541
Total	$	5,364		$	7,591	$	2,925

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

	Fiscal Years Ended
	December 30, 2023		December 31, 2022		January 1, 2022
United States and Puerto Rico	$	19,333	$	26,722	$	10,880
Foreign jurisdictions		2,862		1,758		3,034
	$	22,195	$	28,480	$	13,914

A reconciliation of the unrecognized tax benefits for the year December 30, 2023:

Unrecognized Tax Benefits
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
Gross increases: tax positions in prior period		-
Gross increases: tax positions in current period		-
Balance as of December 30, 2023	$	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 tax expense.  The Company recorded no expense for penalties or interest in the fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022.

At December 30, 2023, December 31, 2022 and January 1, 2022, deferred tax assets and liabilities consist of the following:

	December 30, 2023			December 31, 2022			January 1, 2022
Deferred tax assets:
Allowance for doubtful accounts	$	421		$	270		$	297
Federal and state net operating loss carryforward		48			-			1,153
Compensation		747			775			693
Reserves, accruals, and other		760			296			421
Lease liability		777			1,118			844
Net operating loss carryforward, Germany		55			-			-
Total deferred tax assets		2,808			2,459			3,408
Deferred tax liabilities:
Intangible assets, net of amortization		(1,860	)		(1,696	)		(1,428	)
Prepaid expense deferral		(1,044	)		(872	)		(552	)
Fixed assets, net of depreciation		(689	)		(433	)		(392	)
Right of use assets		(728	)		(953	)		(501	)
Deferred tax liability, net, Canada		(187	)		(166	)		(142	)
Total deferred tax liabilities		(4,508	)		(4,120	)		(3,015	)
Total deferred tax (liabilities) assets, net	$	(1,700	)	$	(1,661	)	$	393

The Company has gross state net operating losses of $0.6 million and foreign net operating losses of $0.1 million to be applied to the net income of future tax returns, respectively.  The state net operating losses are subject to various expiration periods.  The foreign net operating losses have an indefinite carryforward period.

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Germany, 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 or state audits as of December 30, 2023. 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 2018.

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, and share-based compensation. The actual 2023 effective tax rate may vary from the estimate depending on the actual operating income earned in various jurisdictions, and the exercise of stock options and vesting of share-based awards.

Under APB 23, foreign earnings are generally not subject to U.S. tax until repatriated or deemed repatriated under the anti-deferral rules.  The Company has determined that as of December 30, 2023, 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.