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Note 6 - Income Taxes
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
note
6.
INCOME TAXES
 
On
December 22, 2017,
the Tax Cuts and Jobs Act (“TCJA” or the Act) was enacted. The legislation significantly changed U.S. tax law by lowering the federal corporate tax rate from
34.0%
to
21.0%,
effective
January 1, 2018,
modifying the foreign earnings deferral provisions, and imposing a
one
-time toll charge on deemed repatriated earnings of foreign subsidiaries as of
December 31, 2017.
Effective for
2018
and forward, there is a tax on global intangible low-taxed income provisions (“GILTI”) which has been considered in the provision for income taxes..
 
The income tax expense for the years ended
December 
31,
2019
and
2018
consists of the following:
 
   
2019
   
2018
 
                 
Current taxes - Federal
  $
248
    $
(38
)
Current taxes - State
   
11
     
10
 
Current taxes - Foreign
   
150
     
334
 
Deferred taxes - Foreign
   
-
     
20
 
Income tax expense
  $
409
    $
326
 
 
The statutory rate reconciliation for the years ended
December 
31,
2019
and
2018
is as follows:
 
   
2019
   
2018
 
Statutory federal tax provision (benefit)
  $
(172
)   $
107
 
State income tax benefit
   
(29
)    
(36
)
Effect of foreign operations
   
(23
)    
52
 
FIN 48 adjustment, including federal benefit for state reserves
   
44
     
(19
)
Income tax credits
   
(70
)    
-
 
Valuation allowance
   
789
     
(199
)
Permanent differences
   
36
     
15
 
Global Intangile Low-Taxed Income Effect
   
80
     
296
 
Return to Provision - Credits and NOL
   
(240
)    
176
 
Deferred adjustments
   
(16
)    
(62
)
Other
   
10
     
(4
)
Income tax expense
  $
409
    $
326
 
 
 
(Loss) Income from operations before income taxes was derived from the following sources:
 
   
2019
   
2018
 
Domestic
  $
(1,512
)   $
(1,090
)
Foreign
   
693
     
1,582
 
Total
  $
(819
)   $
492
 
 
Deferred tax (liabilities) assets at
December 31, 2019
and
2018,
consist of the following:
 
   
2019
   
2018
 
Deferred Tax
               
Allowance for uncollectable accounts
  $
79
    $
53
 
Inventories reserve
   
348
     
267
 
Accrued vacation
   
112
     
145
 
Accrued bonus
   
171
     
-
 
Stock-based compensation and equity appreciation rights
   
62
     
54
 
Lease Accounting ASC 842 Lease Liability
   
1,230
     
-
 
Section 481(a) adjustment
   
716
     
(249
)
Net operating loss carryforwards
   
97
     
175
 
Tax credit carryforwards
   
171
     
449
 
Other
   
7
     
76
 
Total
   
2,993
     
970
 
Valuation allowance
   
(1,403
)    
(614
)
Deferred tax (liabilities) assets
   
1,590
     
356
 
                 
Prepaid expenses
   
-
     
(40
)
Lease Accounting ASC 842 Lease Asset
   
(1,158
)    
-
 
Property and equipment
   
(432
)    
(316
)
Deferred tax liabilities
   
(1,590
)    
(356
)
Net deferred tax assets
  $
-
    $
-
 
 
 
We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and state net operating loss carry forwards.  A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our consolidated financial statements become deductible for income tax purposes, or when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.
  
Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards
not
expiring unused and tax planning alternatives.
  
In analyzing the need for a valuation allowance, we considered our history of operating results for income tax purposes over the past
three
years in each of the tax jurisdictions where we operate, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability.  After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all our U.S. based deferred tax assets.
 
At
December 31, 2019,
we had federal general business tax credit carryforwards of
$284
that will begin to expire in
2028,
if unused. For U.S. state tax purposes, we have Minnesota R&D credit carryforwards of
$190
and various state net operating loss carryforwards of
$1,
The state credits and NOLs expire at various years starting in
2024.
 
The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended
December 
31,
2019
and
2018
(in thousands):
 
Balance as of December 31, 2018
  $
33
 
         
Tax positions related to current year:
       
Additions based on tax positions related to the current year
   
11
 
Statute of limitations
   
-
 
Balance as of December 31, 2019
  $
44
 
 
 
The
$44
of unrecognized tax benefits as of
December 31, 2019
includes
$25
which, if ultimately recognized, will reduce our annual effective tax rate. The remainder would be a reduction in the deferred tax asset and valuation allowance.
 
Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of
December 
31,
2019
and
2018
was
not
significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns.
 
We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  As of
December 
31,
2019,
with few exceptions, the Company or its subsidiaries are
no
longer subject to examination prior to tax year
2016.