Note 10 - Income Taxes

12 Months Ended

Mar. 25, 2012

Income Tax Disclosure [Text Block]

NOTE J - INCOME TAXES

The income tax provision (benefit) consists of the following for the fiscal years ended March 25, 2012, March 27, 2011 and March 28, 2010:

	March 25, 2012		March 27, 2011			March 28, 2010
Federal
Current	$	1,274	$	2,330		$	2,538
Deferred		1,566		(1,545	)		(212	)
		2,840		785			2,326
State and local
Current		534		734			452
Deferred		475		(412	)		(57	)
		1,009		322			395
	$	3,849	$	1,107		$	2,721

The total income tax provision for the fiscal years ended March 25, 2012, March 27, 2011 and March 28, 2010 differs from the amounts computed by applying the United States Federal income tax rate of 34% to income before income taxes as a result of the following:

	March 25, 2012			March 27, 2011			March 28, 2010
Computed “expected” tax expense	$	3,412		$	1,129		$	2,819
State and local income taxes, net of Federal income tax benefit		682			274			391
Tax-exempt investment earnings		(178	)		(244	)		(272	)
Reduction in uncertain tax positions		(24	)		(94	)		(198	)
Nondeductible meals and entertainment and other		(43	)		42			(19	)
	$	3,849		$	1,107		$	2,721

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

	March 25, 2012			March 27, 2011
Deferred tax assets
Accrued expenses	$	183		$	183
Allowance for doubtful accounts		44			14
Deferred revenue		520			524
Depreciation expense		-			143
Deferred stock compensation		830			729
Excess of straight line over actual rent		340			342
Litigation accrual		-			2,000
Other		20			20
Total gross deferred tax assets	$	1,937		$	3,955
Deferred tax liabilities
Difference in tax bases of installment gains not yet recognized		-			25
Deductible prepaid expense		191			188
Unrealized gain on marketable securities		307			296
Depreciation expense		12			-
Other		211			178
Total gross deferred tax liabilities		721			687
Net deferred tax asset		1,216			3,268
Less current portion		(338	)		(2,356	)
Long-term portion	$	878		$	912

A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We consider the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. Based upon these considerations, management believes that it is more likely than not that the Company will realize the benefit of this net deferred tax asset of $1,216 and $3,268 at March 25, 2012 and March 27, 2011, respectively.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the fiscal years ended March 25, 2012 and March 27, 2011.

	March 25, 2012			March 27, 2011
Unrecognized tax benefits, beginning of year	$	318		$	378
Increases based on tax positions taken in prior years		119			-
Decreases of tax positions taken in prior years		(41	)		(73	)
Increase based on tax positions taken in current year		26			13
Settlements of tax positions taken in prior years		-			-
Unrecognized tax benefits, end of year	$	422		$	318

The amount of unrecognized tax benefits at March 25, 2012 and March 27, 2011 was $422 and $318, respectively, all of which would impact Nathan’s effective tax rate, if recognized.  As of March 25, 2012 and March 27, 2011, the Company had $356 and $330, respectively, accrued for the payment of interest and penalties.  The Company believes that it is reasonably possible that decreases in unrecognized tax benefits of up to $134 may be recorded within the next year.

Nathan’s is subject to tax in the U.S. and various state and local jurisdictions. Effective May 28, 2010, the Company concluded its audit by the Internal Revenue Service for the fiscal year ended March 25, 2007, which resulted in no changes to the return as filed.  New York State completed an examination of fiscal years ending March 2005 through March 2007, resulting in no changes to the returns as filed. New York City has examined tax years ending March 2008 through March 2010.  The Company is reviewing a NYC proposed adjustment which has been accrued in the accompanying financial statements. Nathan’s has received notices from New York City and the States of Florida and Massachusetts that our tax returns for the fiscal years ended March 2008, March 2009 and March 2010 will be reviewed. Additionally, the State of Massachusetts has indicated that our tax return for the fiscal year ended March 2011 will also be reviewed.The earliest tax years’ that are subject to examination by taxing authorities by major jurisdictions are as follows:

Jurisdiction	Fiscal Year
Federal	2009
New York State	2009
New York City	2008