NOTE

- INCOME TAXES

The income tax provision consists of the following for the fiscal years ended

March 29, 2020

and

March 31, 2019:

	March 29 , 20 20		March 31, 2019
Federal
Current	$	2,904	$	5,385
Deferred		322		43
Total Federal income tax		3,226		5,428
State and local
Current		1,323		2,447
Deferred		30		42
Total State and local income tax		1,353		2,489
Total provision for income taxes	$	4,579	$	7,917

March 27, 2020,

President Trump signed the Coronavirus Aid, Relief and Economic Security (“the CARES Act”) into law which among other provisions increases the limitation on the allowed business interest expense deduction from

percent to

percent of adjusted taxable income for tax years beginning

January 1, 2019

and

2020.

Additionally, the CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after

January 1, 2018.

The Company is evaluating the impact of the CARES Act.

The income tax provisions for the years ended

March 29, 2020

and

March 31, 2019

reflect effective tax rates of

25.4%

and

26.9%,

respectively.

During the fiscal year ended

March 31, 2019,

pursuant to Staff Accounting Bulletin

No.

118

("SAB

No.

118"

), Nathan’s refined and completed the accounting for the Tax Cuts and Jobs Act as the Company obtained, prepared, and analyzed additional information and as additional legislative, regulatory, and accounting guidance and interpretations became available, resulting in an increase in the provision for income taxes of

$99

0.3

percentage points.

The total income tax provision for the fiscal years ended

March 29, 2020

and

March 31, 2019

differs from the amounts computed by applying the United States Federal income tax rate of

21%

to income before income taxes as a result of the following:

	March 29 , 20 20			March 31, 2019

Computed tax expense	$	3,783		$	6,176
State and local income taxes, net of Federal income tax benefit		1,028			1,875
Change in uncertain tax positions, net		60			86
Nondeductible meals and entertainment and other		(95	)		(66	)
Nondeductible compensation		31			57
Tax reform act		-			99
Tax benefit share based payments		(228	)		(310	)
Total provision for income taxes	$	4,579		$	7,917

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 2 9 ,			March 31,
	20 20			2019
Deferred tax assets
Accrued expenses	$	394		$	387
Allowance for doubtful accounts		57			58
Deferred revenue		485			955
Deferred stock compensation		45			70
Excess of straight line over actual rent		205			162
Other		94			85
Total deferred tax assets	$	1,280		$	1,717

Deferred tax liabilities
Deductible prepaid expense		246			210
Depreciation expense		720			783
Amortization		323			381
Total deferred tax liabilities		1,289			1,374
Net deferred tax asset (liability)	$	(9	)	$	343

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 its deferred tax asset.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the fiscal years ended

March 29, 2020

and

March 31, 2019.

	March 29 , 20 20			March 31, 2019

Unrecognized tax benefits, beginning of year	$	253		$	263
Decreases of tax positions taken in prior years		(10	)		(8	)
Increases based on tax positions taken in current year		52			46
Settlements of tax positions taken in prior years		16			(48	)
Unrecognized tax benefits, end of year	$	311		$	253

The amount of unrecognized tax benefits at

March 29, 2020

and

March 31, 2019

were

$311

and

$253,

respectively, all of which would impact Nathan’s effective tax rate, if recognized. As of

March 29, 2020

and

March 31, 2019,

the Company had

$259

and

$245,

respectively, accrued for the payment of interest and penalties. For the fiscal years ended

March 29, 2020

and

March 31, 2019

Nathan’s recognized interest and penalties in the amounts of

$32

and

$31,

respectively. During the fiscal year ending

March 28, 2021,

Nathan’s will seek to settle additional uncertain tax positions with the tax authorities. As a result, it is reasonably possible the amount of unrecognized tax benefits, excluding the related accrued interest and penalties, could be reduced by up to

$16

which would favorably impact Nathan’s effective tax rate, although

assurances can be given in this regard.

November 2019,

the State of New Jersey notified Nathan’s that our tax returns for the fiscal years ended

March 27, 2016,

March 26, 2017

and

March 25, 2018

will be audited. The audit is ongoing.

January 2018,

Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s tax returns for the period

April 2014

through

March 2017.

The review has been completed and the effects of the review, which were

not

significant, were factored into the Company’s effective tax rate for fiscal

2019.

The earliest tax years’ that are subject to examination by taxing authorities by major jurisdictions are as follows:

Jurisdiction		Fiscal Year
Federal		2017
New York State		2017
New York City		2017
New Jersey		2016
California		2016