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Note 7 - Income Taxes

6 Months Ended

Jun. 30, 2020

7.	Income Taxes

Income taxes have been accounted for using the asset and liability method in accordance with ASC 740 “Income Taxes”. The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate method. The Company estimates an annual effective tax rate of 2.3% for the year ending December 31, 2020. This rate does not include the impact of any discrete items. The Company’s effective tax rate for the three months ended June 30, 2020 and 2019 was 4.8% and 4.1%, respectively. The Company’s effective tax rate for the six months ended June 30, 2020 and 2019 was 4.4% and 3.4%, respectively.

The Company incurred losses for the three- and six-month periods ended June 30, 2020 and is forecasting additional losses through the year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2020. Due to the Company’s history of losses, there is not sufficient evidence to record a net deferred tax asset associated with the U.S., Europe and Asian operations. Accordingly, a full valuation allowance has been recorded related to the net deferred tax assets in those jurisdictions, including Italy. The Company does not expect a GILTI inclusion for 2019 or 2020; no GILTI tax has been recorded for the three- and six-month periods ending June 30, 2020 or 2019.

The deferred tax benefit during the three months ended June 30, 2020 and 2019, was approximately $0.7 million and $0.9 million, respectively. The deferred tax benefit during the six months ended June 30, 2020 and 2019, was approximately $1.4 million and $1.5 million, respectively. The Israeli jurisdiction was profitable through June 30, 2020 and is projected to be profitable for the year ending December 31, 2020. Consequently, the current tax expense during the three months ended June 30, 2020 and 2019, was approximately $0.01 million and $0.02 million, respectively, and the current tax expense during the six months ended June 30, 2020 and 2019 was $0.03 million and $0.03 million, respectively.

As of June 30, 2020, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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