Natural Health Trends Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The components of income before income taxes consist of the following (in thousands):



	Year Ended December 31,
	2015			2014
Domestic	$	(7,820	)	$	4,502
Foreign	55,613			16,134
Income before income taxes	$	47,793		$	20,636

The components of the income tax provision consist of the following (in thousands):



	Year Ended December 31,
	2015			2014
Current:
Federal	$	12		$	104
State	100			11
Foreign	456			194
Total current taxes	568			309
Deferred foreign taxes	(16		)	(43		)
Income tax provision	$	552		$	266

A reconciliation of the reported income tax provision to the provision that would result from applying the domestic federal statutory tax rate to pretax income is as follows (in thousands):



	Year Ended December 31,
	2015			2014
Income tax at federal statutory rate	$	16,250		$	7,016
Effect of permanent differences	370			9
Change in valuation allowance	2,017			(2,070		)
Foreign rate differential	(18,099		)	(5,240		)
Change in enacted tax rates	5			38
Expiration of net operating loss carryforward	—			519
Other reconciling items	9			(6		)
Income tax provision	$	552		$	266

Deferred income taxes consist of the following (in thousands):



	December 31,
	2015			2014
Deferred tax assets:
Net operating losses	$	3,197		$	10,083
Accrued expenses	3,367			837
Tax credits	418			519
Impairment of long-lived assets	36			69
Other	(4		)	—
Total deferred tax assets	7,014			11,508
Valuation allowance	(4,112		)	(11,440		)
	2,902			68
Deferred tax liabilities:
Foreign earnings	(2,789		)	—
Accrued expenses	(49		)	(64		)
Prepaids	(96		)	(32		)
Other	(28		)	(37		)
Total deferred tax liabilities	(2,962		)	(133		)
Net deferred tax liability	$	(60	)	$	(65	)

As of December 31, 2015, the Company has a full valuation allowance against its U.S. deferred tax assets and certain foreign deferred tax assets. The Company is not recording a valuation allowance in foreign jurisdictions with an overall deferred tax loss. The valuation allowance will be reduced at such time as management believes it is more likely than not that the deferred tax assets will be realized. Any reductions in the valuation allowance will reduce future income tax provisions.

At December 31, 2015, the Company has U.S. federal net operating loss carryforwards of approximately $8.4 million that begin to expire in 2021, if not utilized. The Company also has foreign net operating loss carryforwards totaling $1.4 million in various jurisdictions with various expirations, including $199,000 in China that expires in 2016.

As of December 31, 2015, the Company has recorded deferred tax liabilities to the extent of U.S. net operating losses. The Company has planned to utilize its net operating losses to offset partial repatriation of foreign earnings. All undistributed earnings in excess of the U.S. net operating losses are intended to be reinvested indefinitely as of December 31, 2015.