Income taxes |
9 Months Ended | |
|---|---|---|
Sep. 30, 2018 | ||
| Income Tax Disclosure [Abstract] | ||
| Income Tax Disclosure [Text Block] |
Note 11 – Income taxes The Company’s effective income tax rate was 66.7 %
for the nine months ended September 30, 2018, compared to -
11.0 % for the nine months ended September 30, 2017. The Company’s projected annual effective tax rate differs from the statutory U.S. tax rate of 21 % primarily for the following reasons:
1) availability of U.S. carryforward NOLs, which results in no federal or state taxes; 2) a full valuation allowance on the U.S. net deferred tax asset; 3) taxes owed in foreign jurisdictions such as the United Kingdom, Canada and Italy; and 4) New York City taxes owed. In December 2017 , the Tax Cuts and Jobs Act (the “TCJA”) was enacted. The TCJA included: · A one-time tax on the deemed repatriation of post- 1986 untaxed foreign earnings and profits (“E&P”); · A reduction in the corporate tax rate from 35 % to 21 % for tax years beginning after December 31, 2017 ; · The introduction of a new U.S. tax on certain off-shore earnings referred to as Global Intangible Low-Taxed Income (“GILTI”) at an effective tax rate of 10.5 % for tax years beginning after December 31, 2017 (increasing to 13.125 % for tax years beginning after December 31, 2025 ) partially offset by foreign tax credits; and · Introduction of a territorial tax system beginning in 2018 by providing for a 100 % dividend received deduction on certain qualified dividends from foreign subsidiaries. In the fourth quarter of 2017, the Company recorded an adjustment of $2.9 million to revalue its net deferred tax asset based on a 21% corporate tax rate, which was entirely offset by a reduction in the Company’s valuation allowance. Additionally, the Company recorded a provisional amount of $1.9 million to account for the deemed repatriation of E&P. Due to the complexities involved in accounting for the enactment of the TCJA, SEC Staff Accounting Bulletin 118 allows companies to record provisional estimates of the impacts of the TCJA during a measurement period of up to one year from the enactment date. For its 2017 tax return, the Company conducted a comprehensive E&P analysis which reported a $1.4 million deemed repatriation of E&P. The adjustment to the provisional amount has been included in the tax provision for continuing operations in 2018. The impact of recording the finalized E&P is zero given the Company’s foreign tax credits, net operating loss carryforward and a full valuation allowance on domestic net deferred tax assets.
FASB Staff Q&A, Topic 740 No. 5 , Accounting for Global Intangible Low-Taxed Income, states that an entity can elect to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred. The Company has elected to recognize the resulting tax on GILTI as an expense in the period the tax is incurred and expects to incur no tax for the year ended December 31, 2018 due to the availability of foreign tax credits and net operating losses. |