Note 4 - Income Taxes

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

4. INCOME TAXES

The effective tax rate for the

three

-month period ended

September 30, 2018

decreased to

16.6%

compared to

42.1%

for the same period in

2017

mainly due to a reduction in the corporate tax rate from

35%

to

21%

due to the Tax Cut and Jobs Act (the “Tax Act”) that was enacted on

December 22, 2017,

a tax depreciation method change election for software development creating an income tax benefit of

$308,000,

decreased non-deductible Recapitalization expenses of

$384,000

and other state tax and uncertain tax position adjustments decreasing tax by

$179,000

over the same period last year. In addition, the Company had increased tax benefits of

$161,000

from the exercise of options and dividends paid to non-vested shareholders. The effective tax rate for the

nine

-month period ended

September 30, 2018

decreased to

11.6%

compared to

35.9%

for the same period in

2017.

The effective tax rate was lower mainly due to income tax benefits from the Recapitalization, due to accelerated vesting of restricted stock and settlement of options of

$1.1

million and the reduction in the corporate tax rate from

35%

to

21%

due to the Tax Act. In addition, the Company had increased tax benefits of

$1.7

million from the exercise of options and dividends paid to non-vested shareholders, a tax depreciation method change election for software development costs creating an income tax benefit of

$308,000,

decreased non-deductible Recapitalization expenses of

$247,000,

and other state tax and uncertain tax position adjustments decreasing taxes by

$179,000

over the same period last year.  

As permitted by Staff Accounting Bulletin

No.

118,

the Company made reasonable estimates and recorded a provisional net tax benefit of

$1.9

million as of

December 31, 2017

related to the following elements of the Tax Act:

● Reduction in the U.S. Federal Corporate Tax Rate: The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. Recorded a decrease related to deferred tax assets and liabilities with a corresponding net adjustment to deferred income tax benefit for the year ended December 31, 2017.

● Availability of 100% bonus depreciation on assets placed in service after September 27, 2017

● Certain stock compensation plans potentially subject to limitations as to deductibility

The above items were final as of

September 30, 2018,

and

no

material adjustments were made to the provisional amounts recorded as of

December 31, 2017. 

Under the Tax Act, the Company was also subject to a

one

-time mandatory deemed repatriation tax on accumulated non-U.S. earnings.  The estimates booked as of

December 31, 2017

have been finalized and

no

material adjustments were made to the financials.