Note 15 - Income Tax

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15. Income tax

The following is a reconciliation stated as a percentage of pre-tax earnings of the Ontario, Canada combined statutory corporate income tax rate to the Company’s effective tax rate:

	2017		2016
Combined statutory rate	26.5	%	26.5	%
Nondeductible expenses	2.1		2.4
Tax effect of flow through entities	(1.1	)	(1.1	)
Impact of changes in foreign exchange rates	0.5		-
Adjustments to tax liabilities for prior periods	0.9		(0.4	)
Effects of changes in enacted US federal tax rate	8.6		-
Changes in liability for unrecognized tax benefits	(0.4	)	(0.6	)
Stock-based compensation	0.6		0.5
Foreign, state, and provincial tax rate differential	2.5		4.4
Other taxes	0.7		1.4
Change in valuation allowance	(0.9	)	0.3
Outside basis difference in investments	1.0		0.5
Other	(0.3	)	0.4
Effective income tax rate	40.7	%	34.3	%

On

December 22, 2017,

the Tax Cuts and Jobs Act was enacted in the United States, establishing new tax laws that will affect

2018

and future years, including a reduction of the US federal corporate income tax rate from

35%

to

21%.

As a result of the enacted reduction in the federal corporate income tax rate, the Company’s net deferred income tax assets have been re-measured as of

December 31, 2017.

The re-measurement resulted in incremental income tax expense of

$13,325

for the year ended

December 31, 2017

and a corresponding reduction in net deferred income tax assets.

Earnings before income tax by jurisdiction comprise the following:

		2017		2016
Canada	$	21,567	$	23,309
United States		32,178		40,435
Foreign		101,687		75,656
Total	$	155,432	$	139,400

Income tax expense (recovery) comprises the following:

		2017			2016
Current
Canada	$	4,031		$	5,091
United States		3,235			2,090
Foreign		36,310			30,650
		43,576			37,831
Deferred
Canada		3,125			2,278
United States		21,812			12,753
Foreign		(5,213	)		(5,033	)
		19,724			9,998
Total	$	63,300		$	47,829

The significant components of deferred income tax are as follows:

		2017			2016
Loss carry-forwards and other credits	$	37,869		$	56,822
Expenses not currently deductible		22,830			22,525
Stock-based compensation		525			474
Investments		11,956			17,303
Provision for doubtful accounts		4,221			4,990
Financing fees		162			376
Net unrealized foreign exchange losses		(634	)		(399	)
Depreciation and amortization		(32,035	)		(21,713	)
Less: valuation allowance		(11,079	)		(12,707	)
Net deferred income tax asset	$	33,815		$	67,671

As at

December 31, 2017,

the Company believes that it is ‘more likely than

not’

that the net deferred tax assets of

$33,815

will be realized based upon projected future earnings, consideration of net operating loss (“NOL”) limitations, earnings trends, and tax planning strategies. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if projections of future earnings are reduced.

The Company has gross NOL carry-forward balances as follows:

	Gross loss carry forward				Gross losses not recognized				Net
		2017		2016		2017		2016		2017		2016
Canada	$	30,904	$	37,428	$	24	$	153	$	30,880	$	37,275
United States		47,720		85,550		915		4,100		46,805		81,450
Foreign		50,512		45,988		30,705		31,543		19,807		14,445

The Company has gross capital loss carry-forwards as follows:

	Gross loss carry forward				Gross losses not recognized				Net
		2017		2016		2017		2016		2017		2016
Canada	$	1,881	$	183	$	1,567	$	108	$	314	$	75
United States		1,671		54		1,671		-		-		54
Foreign		7,139		6,521		7,139		6,521		-		-

These amounts above are available to reduce future, federal, state, and provincial income taxes in their respective jurisdictions. NOL carry-forward balances attributable to Canada begin to expire in

2033.

NOL carry-forward balances attributable to the United States begin to expire in

2031.

Foreign NOL carry-forward balances begin to expire in

2019.

The utilization of NOLs

may

be subject to certain limitations under federal, provincial, state or foreign tax laws.

Cumulative unremitted foreign earnings of the US subsidiaries is

nil

(

2016

-

nil

). Cumulative unremitted foreign earnings of international subsidiaries of the Company approximated

$42,709

as at

December 31, 2017 (

2016

-

$21,886

). The Company has

not

provided a deferred tax liability on the unremitted foreign earnings as it is management’s intent to permanently reinvest such earnings outside of Canada. In addition, any repatriation of such earnings would

not

be subject to significant Canadian or foreign taxes.

A reconciliation of the beginning and ending amounts of the liability for unrecognized tax benefits is as follows:

		2017			2016
Balance, January 1	$	2,292		$	2,519
Gross increases for tax positions of current period		-			111
Gross increases for tax positions of prior periods		18			41
Amount recognized on acquisitions		-			613
Reduction for lapses in applicable statutes of limitations		(628	)		(1,031	)
Foreign currency translation		176			39
Balance, December 31	$	1,858		$	2,292

Of the

$1,858

(

2016

-

$2,292

) in gross unrecognized tax benefits,

$1,858

(

2016

-

$2,292

) would affect the Company’s effective tax rate if recognized. For the year-ended

December 31, 2017,

additional interest and penalties of

$18

related to uncertain tax positions was accrued (

2016

-

$234

). The Company reversed

$155

of accrued interest and penalties related to positions lapsed in applicable statute of limitations in

2017

(

2016

-

$58

). As at

December 3, 2017,

the Company had accrued

$213

(

2016

-

$350

) for potential income tax related interest and penalties.

Within the next

twelve

months, the Company believes it is reasonably possible that

$550

of unrecognized tax benefits associated with uncertain tax positions

may

be reduced due to lapses in statutes of limitations.

The Company files tax returns in Canada, United States and multiple foreign jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. Generally, income tax returns filed with the Canada Revenue Agency and related provinces are open for

four

to

seven

years and income tax returns filed with the United States Internal Revenue Service and related states are open for

three

to

five

years. Tax returns in the significant foreign jurisdictions that the company conducts business in are generally open for

four

years. 

The Company does

not

currently expect any other material impact on earnings to result from the resolution of matters related to open taxation years, other than noted above. Actual settlements

may

differ from the amounts accrued. The Company has, as part of its analysis, made its current estimates based on facts and circumstances known to date and cannot predict changes in facts and circumstances that

may

affect its current estimates.