Note 12 - Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

We account for income taxes in accordance with the accounting standard for "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences.

A breakdown of our income tax expense (benefit) for the years ended December 31 is as follows:

($ in thousands)	2022			2021			2020
Federal:
Current	$	5,993		$	1,554		$	4,942
Deferred		(1,417	)		1,729			67
Total Federal		4,576			3,283			5,009
State & local:
Current		1,415			833			793
Deferred		(247	)		(176	)		97
Total State & local		1,168			657			890
Foreign
Current		182			907			102
Deferred		(623	)		(37	)		-
Total Foreign		(441	)		870			102
Total	$	5,303		$	4,810		$	6,001

A reconciliation of recorded Federal income tax expense to the expected expense computed by applying the applicable Federal statutory rate for all periods to income before income taxes follows: 

	Year Ended December 31,
($ in thousands)	2022			2021			2020
Expected expense at statutory rate	$	5,414		$	5,327		$	5,662
Increase (decrease) in income taxes resulting from:
Exempt income from Dominican Republic operations due to tax holiday		(632	)		(1,238	)		(942	)
Tax Rate Differential effect of Foreign Operations		160			45			-
Tax on repatriated earnings from Dominican Republic operations		316			941			438
State and local income taxes		734			222			766
Foreign Tax Credit		(348	)		(547	)		(30	)
Meals and entertainment		5			2			27
Nondeductible penalties		6			3			20
Provision to return filing adjustments and other		(352	)		55			60
Total	$	5,303		$	4,810		$	6,001

Deferred income taxes recorded in the Consolidated Balance Sheets at December 31, 2022 and 2021 consisted of the following:

($ in thousands)	2022		2021
Deferred tax assets:
Asset valuation allowances and accrued expenses	$	2,257	$	239
Inventories		3,300		1,564
State and local income taxes		293		346
Pension and deferred compensation		42		38
Net operating losses		794		302
163(J) Interest limitation		1,077		-
Lease asset		2,608		2,696
Total deferred tax assets		10,371		5,185
Deferred tax liabilities:
Fixed assets		4,490		4,144
Intangible assets		10,262		7,179
Other assets		793		317
Tollgate tax on Lifestyle earnings		228		228
State and local income taxes		59		1,001
Lease Liability		2,545		2,609
Total deferred tax liabilities		18,377		15,478
Net deferred tax liability	$	8,006	$	10,293

We have provided Puerto Rico tollgate taxes on approximately $3.7 million of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994, that would be payable if such earnings were repatriated to the United States. In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to June 30, 1994; thus no other provision for tollgate tax has been made on earnings after that date. If we repatriate the earnings from Lifestyle, $227,563 of tollgate tax would be due as of December 31, 2022. 

We are subject to tax examinations in various taxing jurisdictions. The earliest exam years open for examination are as follows:

	Earliest Exam Year
Taxing Authority Jurisdiction:
U.S. Federal	2019
Various U.S. States	2018
Puerto Rico (U.S. Territory)	2017
Canada	2017
China	2019
Mexico	2021
United Kingdom	2021
Australia	2021

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2022, no such expenses were recognized during the year. We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.  Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the standard.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations.