Note 12. Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

The provision for income taxes consisted of the following components for the years ended December 31 (in 000’s):

	2019			2018
Current:
Federal	$	522		$	499
State		94			145
Foreign		21			73
Total Current		637			717
Deferred:
Federal		(434	)		(259	)
State		(55	)		(59	)
Foreign		(39	)		(26	)
Total Deferred		(528	)		(344	)
Total expense for income taxes	$	109		$	373

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31 (in 000's, except percentages):

	2019						2018
	Amount			Percentage			Amount			Percentage
Federal statutory tax rate	$	165			21.0	%	$	254			21.0	%
State tax rate		12			1.5	%		55			4.6	%
Permanent difference – stock-based compensation		(13	)		(1.6	)%		(2	)		(0.1	)%
Permanent difference – other		8			0.9	%		4			0.1	%
Provision to return		(37	)		(4.5	)%		96			7.9	%
Tax on foreign earnings – tax reform		24			2.9	%		41			3.5	%
Foreign rate differential		(11	)		(1.3	)%		2			0.1	%
Research and development credit		(39	)		(4.7	)%		(77	)		(6.3	)%
Total	$	109			14.2	%	$	373			30.8	%

The effective income tax rate for 2019 was favorably impacted by the research and development tax credit, foreign tax credits as well as a benefit related to the exercise of stock based compensation.

Components of net deferred income tax assets, including a valuation allowance, are as follows at December 31 (in 000's):

	2019			2018			Change
Assets:
Net operating loss	$	—		$	25		$	(25	)
Deferred revenue		379			256			123
Allowance for doubtful accounts		149			109			40
Stock options		156			116			40
Basis difference in intangible assets		—			16			(16	)
Transaction costs		49			—			49
Other		39			—			39
Foreign tax credits carryforward		—			1,181			(1,181	)
Total deferred tax asset		772			1,703			(931	)
Less: Valuation allowance		—			(1,181	)		1,181
Total net deferred tax asset		772			522			250
Liabilities
Prepaid expenses		(23	)		(11	)		(12	)
Basis difference in fixed assets		(14	)		—			(14	)
Capitalized software		(94	)		(285	)		191
Purchase of intangibles		(522	)		(630	)		108
Other		(4	)		(9	)		5
Total deferred tax liability		(657	)		(935	)		278
Total net deferred tax asset / (liability)	$	115		$	(413	)	$	528

A valuation allowance of $0 and $1,181,000 was recorded against its deferred tax asset balance as of December 31, 2019, and December 31, 2018, respectively. During the current year, the Company determined that its foreign tax credit carryforward had expired and therefore, released both the credit and associated valuation allowance, with no impact to the tax rate or tax expense.

As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. It has been determined that it is more likely than not that the Company's deferred tax assets are able to be realized based on future positive earnings and reversal of existing temporary differences.

The Company had no unrecognized tax benefits as of December 31, 2019 or December 31, 2018. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties at December 31, 2019.

Undistributed earnings of the Company are insignificant as of December 31, 2019. With the enactment of the Tax Cuts and Jobs Act of 2017, the Company does not consider any of its foreign earnings as indefinitely reinvested.

The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2018, 2017 and 2016 are open to audit by federal and state taxing authorities.