Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Taxes  
Income Taxes

4.  Income Taxes

 

Deferred tax attributes resulting from differences between the tax basis of assets and liabilities and the reported amounts in the consolidated balance sheet at December 31, 2017 and 2016 are as follows: 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Non-current assets

 

 

 

 

 

 

 

Accruals and reserves

 

$

331

 

$

546

 

Deferred rent credit

 

 

161

 

 

283

 

Depreciation and amortization

 

 

(354)

 

 

(413)

 

Total deferred tax assets

 

$

138

 

$

416

 

 

The provision for income taxes is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

    

2017

    

2016

    

2015

 

Current:

 

 

 

 

 

 

 

 

 

 

Federal

 

$

2,253

 

$

2,515

 

$

2,779

 

State

 

 

552

 

 

55

 

 

61

 

Foreign

 

 

408

 

 

357

 

 

231

 

 

 

 

3,213

 

 

2,927

 

 

3,071

 

Deferred:

 

 

 

 

 

 

 

 

 

 

Federal

 

 

273

 

 

102

 

 

(40)

 

State

 

 

 5

 

 

 3

 

 

(3)

 

 

 

 

278

 

 

105

 

 

(43)

 

 

 

$

3,491

 

$

3,032

 

$

3,028

 

Effective Tax Rate

 

 

40.8

%  

 

33.9

%  

 

34.2

%

 

The reasons for the difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

    

2017

    

2016

    

2015

 

Statutory rate applied to pretax income

 

$

2,908

 

$

3,037

 

$

3,012

 

State income taxes, net of federal income tax benefit

 

 

36

 

 

36

 

 

39

 

Potential state tax obligations, net of federal tax benefit

 

 

375

 

 

 —

 

 

 —

 

Impact of new tax law

 

 

189

 

 

 —

 

 

 —

 

Foreign income taxes under U.S. statutory rate

 

 

(70)

 

 

(64)

 

 

(44)

 

Other items

 

 

53

 

 

23

 

 

21

 

Income tax expense

 

$

3,491

 

$

3,032

 

$

3,028

 

 

The Company receives a tax deduction from the income realized by employees on the exercise of certain non-qualified stock options and restricted stock awards for which the tax effect of the difference between the book and tax deduction is recognized as a component of current income tax.

 

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. As of December 31, 2017, the Company’s 2014 through 2016 Federal tax returns remain open for examination, as the Company recently concluded an Internal Revenue Service examination for the 2011 and 2012 tax years. This examination resulted in no change to the previously filed Federal corporate tax returns.  The Company’s New Jersey and Canadian tax returns are open for examination for the years 2014 through 2016. During 2017, the Company recorded an accrual of $0.4 million, net of federal tax benefit, for potential liabilities for state income taxes in states which have enacted economic nexus statutes and the Company has not filed income tax returns.  The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

 

For financial reporting purposes, income before income taxes includes the following components:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

    

2017

    

2016

    

2015

 

United States

 

$

6,929

 

$

7,514

 

$

7,937

 

Foreign

 

 

1,624

 

 

1,419

 

 

921

 

 

 

$

8,553

 

$

8,933

 

$

8,858

 

 

 

The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to the U.S. income tax law.  Effective in 2018, the Tax Act reduces U.S. statutory tax rates from 34% to 21%. Accordingly, we remeasured our deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized, resulting in a one-time $0.1 million net tax expense in 2017.

 

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we have made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017.  As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts.  Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which adjustments are made.  The accounting for the tax effects of the Tax Act will be completed in 2018.