Note 13 - Income Taxes |
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] |
Note 13. Income Taxes Following are the components of the provision for income taxes:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:
The following summarizes the difference between the income tax expense and the amount computed by applying the statutory federal income tax rates of 21%
The decrease in valuation allowance from March 28, 2020 to March 27, 2021 was $9,530,000.
As of March 27, 2021, the Company had pre-tax federal net operating loss carryforwards of $9,716,000 and state net operating loss carryforwards of $4,721,000 available to reduce future taxable income. These amounts are net of a 382 limitation of $38,345,000 on the federal net operating loss and $19,612,000 on the state net operating loss. The 382 limitation was triggered due to an ownership change in the 2020 year. The Company recently completed an Internal Revenue Code Section 382 analysis and has reflected in the current year the expected reduction of its federal and state net operating loss and general business tax credit carryforwards due to an ownership change in connection with past equity financings. The federal and state net operating loss carryforwards begin to expire from fiscal 2022 through 2038 and from 2029 through 2040, respectively. The federal net operating loss amount of $1,765,000 from fiscal year ended 2020 through 2021 will have an indefinite life. The net amount of net operating loss carryforwards may be subject to further 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 2040 and state income tax credit carryforwards are carried forward indefinitely. The ownership change in 2020 triggered a section 383 limitation on the federal income tax credits. The section 383 limitation reduced the federal carryforward by $394,500 but did not reduce the state credit carryforward due to the indefinite carryforward.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 27, 2021, the Company recorded unrecognized tax benefits of $52,000 related to uncertain tax positions. The unrecognized tax benefit is netted against the deferred tax asset with a full valuation allowance. The Company has not recorded a liability for any penalties or interest related to the unrecognized tax benefits.The Company files U.S Federal, California and New Hampshire state tax returns. The Company is generally no longer subject to tax examinations for years prior to the fiscal year 2018 for federal purposes and fiscal year 2017 for California purposes, except in certain limited circumstances.A reconciliation of the beginning and ending amount of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:
The total amount of interest and penalties related to unrecognized tax benefits at
March 27, 2021, 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 the next twelve (12 ) months. |