Note 9 - Income Tax Expense (Benefit)

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

The components of income (loss) before taxes on income were as follows (in thousands):

	Years Ended December 31,
	2022			2021
Domestic	$	(59,407	)	$	16,639
Foreign		21,372			16,488
Income (loss) before taxes on income	$	(38,035	)	$	33,127

Aggregate income tax provisions consist of the following (in thousands):

	Years Ended December 31,
	2022			2021
Current:
Federal	$	3,580		$	4,035
State and local		1,314			777
Foreign		1,399			2,033
		6,293			6,845
Deferred Taxes:
Deferred tax benefit		(12,358	)		(3,158	)
Income tax expense (benefit)	$	(6,065	)	$	3,687

The significant components of the deferred income tax asset (liability) are as follows (in thousands):

	December 31,
	2022			2021
Deferred income tax assets:
Pension accruals	$	3,513		$	4,023
Operating reserves and other accruals		7,962			5,520
Book carrying value in excess of tax basis of intangibles		2,321			-
Capitalized research expenses		1,704			-
Tax credits		-			527
Deferred income tax liabilities:
Book carrying value in excess of tax basis of property		(4,183	)		(4,814	)
Book carrying value in excess of tax basis of intangibles		-			(5,076	)
Deferred expenses		(599	)		(539	)
Net deferred income tax asset (liability)	$	10,718		$	(359	)

The difference between the total statutory Federal income tax rate and the actual effective income tax rate is accounted for as follows:

	Years Ended December 31,
	2022			2021
Statutory federal income tax rate		21.0	%		21.0	%
State and local income taxes, net of federal income tax benefit		3.4	%		1.4	%
Rate impacts due to foreign operations		4.3	%		(6.7	%)
Changes in uncertain tax positions		-			(0.5	%)
Compensation related		(0.8	%)		(1.6	%)
Pension termination		(0.3	%)		(1.8	%)
R&D tax credits		0.7	%		(0.4	%)
Impairment charge		(11.7	%)		-
Other		(0.7	%)		(0.3	%)
Effective income tax rate		15.9	%		11.1	%

The Tax Cuts and Jobs Act enacted on December 22, 2017 imposed a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States. The Company expects to permanently reinvest the earnings from its wholly-owned Brazilian and UK subsidiaries, and accordingly, has not provided deferred taxes on the subsidiaries’ undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the earnings from its Brazilian and UK subsidiaries is immaterial at December 31, 2022.

Only tax positions that meet the more-likely-than-not recognition threshold are recognized in the financial statements. As of December 31, 2022 and 2021, we had $0.8 million and $0.8 million, respectively, of unrecognized tax benefits, all of which, if recognized, would favorably affect the annual effective income tax rate. We do not expect any significant amount of this liability to be paid in the next twelve months. Accordingly, the balance of $0.8 million as of December 31, 2022 is included in other long-term liabilities.

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):

	December 31,
	2022			2021
Balance at the beginning of year	$	801		$	993
Additions based on tax positions related to the current year		-			94
Additions for tax positions of prior years		129			23
Reductions due to lapse of statute of limitations		(123	)		(309	)
Balance at the end of year	$	807		$	801

We accrue interest and penalties related to unrecognized tax benefits in income tax expense, and the related liability is included in other long-term liabilities in our balance sheet. During the years ended December 31, 2022 and 2021, we recognized $0.2 million and $0.1 million, respectively, for interest and penalties, net of tax benefits. During the year ended 2022 there was no significant reduction to the liability for interest and penalties due to any lapses in statute of limitations. During the year 2021 we reduced the liability by $0.2 million, for interest and penalties due to lapse of statute of limitations. At December 31, 2022 and 2021, we had $0.2 million and $0.2 million, respectively, accrued for interest and penalties, net of tax benefit.

We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by approximately $0.2 million within the next twelve months due to the closure of tax years by expiration of the statute of limitations and audit settlements related to various state tax filing positions. The earliest year open to federal examinations is 2019 and significant state examinations is 2016.