Note 6 - Income Taxes

12 Months Ended

Aug. 27, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 6. Income Taxes

The following table details the categories of total income tax assets and liabilities for both continuing and discontinued operations resulting from the cumulative tax effects of temporary differences:

	August 27, 2014		August 28, 2013
	(In thousands)
Deferred income tax assets:
Workers’ compensation, employee injury, and general liability claims	$	158	$	261
Deferred compensation		354		196
Net operating losses		5		650
General business and foreign tax credits		8,911		7,630
Depreciation, amortization and impairments		1,379		—
Straight-line rent, dining cards, accruals, and other		3,719		3,786
Total deferred income tax assets		14,526		12,523
Deferred income tax liabilities:
Depreciation, amortization and impairments		—		1,323
Property taxes and other		1,576		1,591
Total deferred income tax liabilities		1,576		2,914
Net deferred income tax asset	$	12,950	$	9,609

The Company had deferred tax assets at August 27, 2014 of approximately $13.0 million, the most significant of which include the Company’s general business tax credits carryovers to future years of approximately $8.6 million of deferred tax assets, combined. This item may be carried forward up to twenty years for possible utilization in the future. The carryover of general business tax credits, beginning in fiscal 2002, will begin to expire at the end of fiscal 2022 through 2034, if not utilized by then.

Management has evaluated both positive and negative evidence, including its forecasts of the Company’s future operational performance and taxable income, adjusted by varying probability factors, in making a determination as to whether it is more likely than not that all or some portion of the deferred tax assets will be realized. Based on its analysis, management concluded that no valuation allowance was necessary as of the end of fiscal 2014, 2013, and 2012. The reversals of prior year’s valuation allowance amounts in fiscal 2011 and 2012 were based upon continued improvement in current and projected operational performance and the ability to utilize NOL amounts through carryforwards. This positive and negative evidence was weighed, and in each year, an increasing portion of the Company’s NOL and general business tax credits was determined to be realizable, on a more likely than not basis, with corresponding adjustments to the valuation allowance. The reductions of the valuation allowance in fiscal 2011 and 2012 are reported as part of the income tax expense (or benefit) included in income/(loss) from continuing operations for the year.

An analysis of the provision for income taxes for continuing operations is as follows:

	August 27, 2014			August 28, 2013		August 29, 2012
	(In thousands)
Current federal and state income tax expense	$	371		$	614	$	1,631
Current foreign income tax expense		87			89		74
Deferred income tax expense (benefit)		(2,118	)		1,072		(51	)
Total income tax expense	$	(1,660	)	$	1,775	$	1,654

Relative only to continuing operations, the reconciliation of the expense (benefit) for income taxes to the expected income tax expense (benefit), computed using the statutory tax rate, was as follows:

	Year Ended
	August 27, 2014						August 28, 2013						August 29, 2012
	Amount			%			Amount			%			Amount			%
	(In thousands and as a percent of pretax income from continuing operations)
Income tax expense (benefit) from continuing operations at the federal rate	$	(1,120	)		34.0	%	$	2,149			34.0	%	$	3,078			34.0	%
Permanent and other differences:
Federal jobs tax credits (wage deductions)		404			(12.3	)		355			5.6			217			2.4
Stock options and restricted stock		54			(1.7	)		50			0.8			141			1.6
Other permanent differences		185			(5.6	)		68			1.1			128			1.4
State income tax, net of federal benefit		52			(1.6	)		338			5.3			1,407			15.6
General Business Tax Credits		(1,187	)		36.1			(1,043	)		(16.5	)		(639	)		(7.1	)
Other		(48	)		1.5			(142	)		(2.2	)		(39	)		(0.4	)
Change in valuation allowance		—			—			—			—			(2,639	)		(29.2	)
Income tax expense from continuing operations	$	(1,660	)		50.4	%	$	1,775			28.1	%	$	1,654			18.3	%

For the fiscal year ended August 27, 2014, including both continuing and discontinued operations, the Company is estimated to report federal taxable income of approximately $0.6 million. The Company utilized substantially all the remaining federal NOL’s in fiscal year 2014.

For the fiscal year ended August 28, 2013, including both continuing and discontinued operations, the Company generated federal taxable income of approximately $4.1 million. The Company utilized NOL carryovers from prior years to reduce the current year federal tax liability to zero.

For the fiscal year ended August 29, 2012, including both continuing and discontinued operations, the Company generated federal taxable income of approximately $10.3 million. The Company utilized NOL carryovers from prior years to reduce the current year federal tax liability to zero.

The IRS has periodically reviewed the Company’s federal income tax returns. The IRS concluded a review of the federal income tax return for fiscal year 2008 on March 12, 2011. The IRS made no changes to the return. The State of Texas examined the franchise tax filings for report years 2008 through 2011 based on accounting years 2007 through 2010 resulting in additional taxes of $33,000. The State of Louisiana is also examining the Company’s tax return filings resulting in additional taxes, interest and penalties of $0.3 million. There are no other examinations of income or franchise tax filings currently scheduled or underway.

Prior to fiscal 2010, the Company operated in five states and was subject to state and local income taxes in addition to federal income taxes. With the acquisition of Fuddruckers restaurants at the end of fiscal 2010 and Cheeseburger in Paradise in fiscal 2013, the Company has income tax filing requirements in over 30 states.

There were no payments of federal income taxes in fiscal 2011, 2012, 2013 or 2014. State income tax payments were approximately $0.5 million each year during fiscal 2011, 2012, 2013 and 2014.

The following table is a reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of fiscal years 2012, 2013 and 2014 (in thousands):

Balance at August 31, 2011	$	83
Increase (decrease) based on prior year tax positions		480
Interest Expense		407
Balance as of August 29, 2012		970
Increase (decrease) based on prior year tax positions		(273	)
Interest Expense		72
Balance as of August 28, 2013	$	769
Increase (decrease) based on prior year tax positions		(707	)
Interest Expense		-
Balance as of August 27, 2014	$	62

The unrecognized tax benefits would favorably affect the Company’s effective tax rate in future periods if they are recognized. There were no interest and penalties associated with unrecognized benefits as of August 27, 2014. The Company has included interest or penalties related to income tax matters as part of income tax expense (or benefit).

It is reasonably possible that the amount of unrecognized tax benefits with respect to our uncertain tax positions could significantly increase or decrease within 12 months. However, based on the current status of examinations, it is not possible to estimate the future impact, if any, to recorded uncertain tax positions as August 27, 2014.

Management believes that adequate provisions for income taxes have been reflected in the financial statements and is not aware of any significant exposure items that have not been reflected in the financial statements. Amounts considered probable of settlement within one year have been included in the accrued expenses and other liabilities in the accompanying consolidated balance sheet.

Tangible Property Regulations

In September 2013, the U.S. Treasury issued final regulations addressing the tax consequences associated with the acquisition, production and improvement of tangible property and which are generally effective for taxable years beginning on or after January 1, 2014, which for the Company is was year beginning August 28, 2014. The Company plans to timely adopt these regulations and, at this time, has not evaluated the impact of these regulations on its consolidated financial statements.