Note H - Income Taxes

12 Months Ended

Mar. 28, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE H – INCOME TAXES

The income tax provision consists of the following for the fiscal years ended March 28, 2021 and March 29, 2020:                  

	March 28, 2021			March 29, 2020
Federal
Current	$	3,146		$	2,904
Deferred		(92	)		322
Total Federal income tax		3,054			3,226
State and local
Current		1,251			1,323
Deferred		(55	)		30
Total State and local income tax		1,196			1,353
Total provision for income taxes	$	4,250		$	4,579

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“the CARES Act”) was enacted into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 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 income tax provisions for the fiscal years ended March 28, 2021 and March 29, 2020 reflect effective tax rates of 27.7% and 25.4%, respectively.

The total income tax provision for the fiscal years ended March 28, 2021 and March 29, 2020 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 28, 2021			March 29, 2020
Computed tax expense	$	3,218		$	3,783
State and local income taxes, net of Federal income tax benefit		936			1,028
Change in uncertain tax positions, net		68			60
Nondeductible meals and entertainment and other		(35	)		(95	)
Nondeductible compensation		63			31
Tax benefit share based payments		-			(228	)
Total provision for income taxes	$	4,250		$	4,579

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 28,		March 29,
	2021		2020
Deferred tax assets
Accrued expenses	$	339	$	394
Allowance for doubtful accounts		87		57
Deferred revenue		445		485
Deferred stock compensation		58		45
Operating lease liability		2,190		2,321
Other		120		94
Total deferred tax assets	$	3,239	$	3,396
Deferred tax liabilities
Deductible prepaid expense		223		246
Operating lease right-of-use asset		1,954		2,116
Depreciation expense		634		720
Amortization		290		323
Total deferred tax liabilities		3,101		3,405
Net deferred tax asset (liability)	$	138	$	(9	)

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 28, 2021 and March 29, 2020.

	March 28, 2021			March 29, 2020
Unrecognized tax benefits, beginning of year	$	311		$	253
Decreases of tax positions taken in prior years		(16	)		(10	)
Increases based on tax positions taken in current year		102			52
Settlements of tax positions taken in prior years		-			16
Unrecognized tax benefits, end of year	$	397		$	311

The amount of unrecognized tax benefits at March 28, 2021 and March 29, 2020 were $397 and $311, respectively, all of which would impact Nathan’s effective tax rate, if recognized. As of March 28, 2021 and March 29, 2020, the Company had $256 and $259, respectively, accrued for the payment of interest and penalties. For the fiscal years ended March 28, 2021 and March 29, 2020 Nathan’s recognized interest and penalties in the amounts of $(3) and $32, respectively.

During the fiscal year ending March 27, 2022, 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 $19, which would favorably impact Nathan’s effective tax rate, although no assurances can be given in this regard.

In 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. In November 2020, the audit was completed and no adjustments were noted.

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

Jurisdiction	Fiscal Year
Federal	2018
New York State	2018
New York City	2018
New Jersey	2017
California	2017