Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

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 2.2% 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 September 30, 2020 and 2019 was 0.0% and 1.1%, respectively. The Company’s effective tax rate for the nine months ended September 30, 2020 and 2019 was 3.0% and 1.8%, respectively.

The Company incurred losses for the nine-month period ended September 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, Canada and Asia operations. Accordingly, a full valuation allowance has been recorded related to the net deferred tax assets in those jurisdictions, including Italy.

The deferred tax benefit during the three months ended September 30, 2020 and 2019, was approximately $0.00 million and $1.07 million, respectively. The deferred tax benefit during the nine months ended September 30, 2020 and 2019, was approximately $1.39 million and $2.55 million, respectively. The Israeli jurisdiction was profitable through September 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 September 30, 2020 and 2019, was approximately $0.00 million and $0.02 million, respectively, and the current tax expense during the nine months ended September 30, 2020 and 2019, was approximately $0.04 million and $0.05 million, respectively.

At September 30, 2020, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate.

The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income (“GILTI”), states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI as a period expense in the year the tax is incurred. The Company does not expect a GILTI inclusion for 2019 or 2020; no GILTI tax has been recorded for the nine months ending September 30, 2020 or 2019.