Annual report pursuant to Section 13 and 15(d)

Note 14 - Income Taxes

v3.7.0.1
Note 14 - Income Taxes
12 Months Ended
Mar. 25, 2017
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
14
   Income Taxes
 
Following are the components of the provision for income taxes:
 
Fiscal years ended  
March 25,
   
March 26,
 
(in thousands)
 
2017
   
2016
 
             
Current
               
Federal
  $
    $
 
State
   
2
     
2
 
Total Current    
2
     
2
 
Deferred
               
Federal
   
(496
)    
(1,297
)
State
   
(6
)    
215
 
Total Deferred    
(502
)    
(1,082
)
                 
Change in liability for uncertain tax positions
   
14
     
13
 
Change in valuation allowance
   
488
     
1,069
 
Provision for income taxes
  $
2
    $
2
 
 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows:
 
Fiscal years ended (In thousands)
 
March 25,
2017
 
 
March 26,
2016
 
Net operating loss carryforwards
  $
15,984
    $
15,065
 
Income tax credits
   
323
     
296
 
Inventory reserves and additional costs capitalized
   
1,450
     
1,935
 
Accrued vacation
   
109
     
131
 
Deferred rent
   
     
44
 
Non-qualified stock options and restricted stock
   
5
     
(10
)
Other
   
146
     
68
 
Total deferred tax assets
   
18,017
     
17,529
 
                 
Valuation allowance
   
(18,017
)    
(17,529
)
Net deferred tax assets
  $
    $
 
 
The following summarizes the difference between the income tax expense and the amount computed by applying the statutory federal income tax rate of
34%
to income before income tax. The items comprising these differences consisted of the following for the fiscal years ended
March 25, 2017
and
March 26, 2016:
 
Fiscal years ended
(In thousands except percentages)
 
March 25, 2017
 
 
March 25, 2016
 
Statutory federal income tax (benefit)   $
(525
)    
34.0
%   $
(1,395
)    
34.0
%
Valuation allowance
   
488
     
(31.6
)    
1,069
     
(26.1
)
State income tax, net of federal benefit
   
(90
)    
5.8
     
(239
)    
5.8
 
Net operating loss expiration
   
86
     
(5.6
)    
451
     
(11.0
)
Non tax-deductible expenses
   
77
     
(5.0
)    
107
     
(2.6
)
Tax credits
   
(40
)    
2.6
     
(35
)    
0.9
 
Liability for uncertain tax positions
   
14
     
(0.9
)    
13
     
(0.3
)
Other
   
(8
)    
0.5
     
31
     
(0.8
)
Effective income tax   $
2
     
(0.2
)%   $
2
     
(0.1
)%
 
The increase in valuation allowance from
March 26, 2016
to
March 25, 2017
was
$488,000.
 
As of
March 25, 2017,
the Company had pre-tax federal net operating loss carryforwards of
$43
million and state net operating loss carryforwards of
$23
million available to reduce future taxable income.   The federal and state net operating loss carryforwards begin to expire from fiscal
2023
through
2037
and from
2017
through
2037,
respectively.  Utilization of net operating loss carryforwards
may
be subject to annual limitations due to certain ownership change limitations as required by Internal Revenue Code Section
382.
  The federal income tax credits begin to expire from
2032
through
2037
and state income tax credit carryforwards are carried forward indefinitely.
 
The Company has recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which
may
not
be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Management considers both positive and negative evidence and tax planning strategies in making this assessment.
 
As of
March 25, 2017,
the Company recorded unrecognized tax benefits of
$120,000
related to uncertain tax positions. The unrecognized tax benefit is netted against the non-current deferred tax asset on the Consolidated Balance Sheet. The Company has
not
recorded a liability for any penalties or interest related to the unrecognized tax benefits.
 
The Company files U.S federal and California state tax returns. The Company is generally
no
longer subject to tax examinations for years prior to the fiscal year
2012
for federal purposes and fiscal year
2011
for California purposes, except in certain limited circumstances. The Company does have a California Franchise Tax Board audit that is currently in process. The Company is working with the California Franchise Tax Board to resolve all audit issues and does
not
believe any material taxes or penalties are due. However, as a result of the ongoing examination, the Company eliminated certain income tax credit carryovers. The write-off of these income tax credit carryovers had
no
impact on total income tax expense as the majority had an uncertain tax position reserve with the balance having a full valuation allowance against the deferred tax asset.
 
A reconciliation of the beginning and ending amount of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:
 
 
(In thousands)
 
Fiscal Year
2017
 
 
Fiscal Year
2016
 
Balance as of beginning of year
  $
106
    $
93
 
Additions based on current year tax positions
   
14
     
13
 
(Reductions) additions for prior year tax positions
   
     
 
Balance as of end of year
  $
120
    $
106
 
 
The total amount of interest and penalties related to unrecognized tax benefits at
March 25, 2017
is
not
material. The amount of tax benefits that would impact the effective rate, if recognized, is
not
expected to be material. The Company does
not
anticipate any significant changes with respect to unrecognized tax benefits within next
twelve
(
12
) months.