Annual report pursuant to Section 13 and 15(d)

Note 11 - Income Taxes

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Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11. Income Taxes

 

The provision for income tax expense consists of the following:

 

   

Year ended December 31

  
   

2023

    

2022

    

2021

  

Current:

                        

Federal

   $ (2,854 )   $ 10,515     $ 4,246  

State

     804       1,505       (1,967 )
      (2,050 )     12,020       2,279  

Deferred:

                        

Federal

     7,709       (2,187 )     1,874  

State

     (148 )     (1,081 )     (256 )
      7,561       (3,268 )     1,618  
    $ 5,511     $ 8,752     $ 3,897  

 

A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2023, 2022 and 2021 is as follows:

 

   

2023

    

2022

    

2021

  

Federal income tax expense at statutory rate

   $ 6,139     $ 9,946     $ 7,264  

State taxes, net of federal benefit

     762       1,445       (1,329 )

Valuation allowance

     (67 )     (1,202 )     (101 )

Change in uncertain tax positions, net

     225       356       (705 )

Research and development credit

     (1,012 )     (1,333 )     (859 )

Investment tax credit

     (682 )     -       -  

State rate change

     92       (168 )     (652 )

Other

     54       (292 )     279  
    $ 5,511     $ 8,752     $ 3,897  

 

Significant components of the Company’s deferred tax liabilities and assets are as follows:

 

   

December 31,

  
   

2023

    

2022

  

Deferred tax assets:

                

Allowance for doubtful accounts

   $ 413     $ 341  

Inventory reserves

     1,468       1,367  

Warranty liability

     1,690       1,856  

Deferred compensation

     2,124       2,349  

Earnout liabilities

     -       245  

Pension and retiree health benefit obligations

     1,225       1,344  

Accrued vacation

     1,137       1,278  

Research expenditures

     5,842       3,711  

Operating lease liabilities

     4,730       4,648  

Net operating losses

     1,663       2,126  

Other accrued liabilities

     4,376       4,301  

State credit carryforwards

     1,032       -  

Other

     404       990  

Valuation allowance

     (2,005 )     (2,071 )

Total deferred tax assets

     24,099       22,485  

Deferred tax liabilities:

                

Interest rate swaps

     (994 )     (1,729 )

Tax deductible goodwill and other intangibles

     (35,974 )     (35,492 )

Accelerated depreciation

     (9,924 )     (10,225 )

Operating leases - right of use assets

     (4,430 )     (4,288 )

Other

     (680 )     (588 )

Total deferred tax liabilities

     (52,002 )     (52,322 )

Net deferred tax liabilities

   $ (27,903 )   $ (29,837 )

 

Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

 

State operating loss carry forwards for tax purposes will result in future tax benefits of approximately $1,203. These loss carry-forwards began to expire in 2021. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability, future projections of profitability, and future deferred tax liabilities, the Company concluded that a valuation allowance of approximately $1,545 is necessary at December 31, 2023 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit. The Company also carries a valuation allowance for approximately $460 related to non-state net operating loss carry-forwards which are likely to expire prior to the Company’s ability to use the tax benefit.

 

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

 

   

2023

    

2022

    

2021

  

Balance at beginning of year

   $ 1,519     $ 1,214     $ 1,954  

Increases for tax positions taken in the current year

     277       350       311  

Decreases due to settlements with taxing authorities

     -       -       (991 )

Decreases due to lapses in the statute of limitations

     (95 )     (45 )     (60 )

Balance at the end of year

   $ 1,701     $ 1,519     $ 1,214  

 

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $1,701 at December 31, 2023. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $662 and $581 of accrued interest and penalties is reported as an income tax liability at December 31, 2023 and 2022, respectively. The liability for unrecognized tax benefits is reported in Other Long‑term Liabilities on the Consolidated Balance Sheets at December 31, 2023 and 2022.

 

The Company files income tax returns in the United States (federal) and various states. Tax years open to examination by tax authorities under the statute of limitations include 2020, 2021 and 2022 for Federal and 2019 through 2022 for most states. Tax returns for the 2023 tax year have not yet been filed.

 

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the year incurred and required taxpayers to amortize them over a period of five years for tax purposes. This mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities.