Note H - Income Taxes

12 Months Ended

Mar. 26, 2023

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 26, 2023 and March 27, 2022:

	March 26, 2023		March 27, 2022
Federal
Current	$	5,293	$	4,019
Deferred		137		(380	)
Total Federal income tax		5,430		3,639
State and local
Current		1,681		1,365
Deferred		70		(64	)
Total State and local income tax		1,751		1,301
Total provision for income taxes	$	7,181	$	4,940

The income tax provisions for the fiscal years ended March 26, 2023 and March 27, 2022 reflect effective tax rates of 26.8% and 26.7%, respectively.

The total income tax provision for the fiscal years ended March 26, 2023 and March 27, 2022 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 26, 2023			March 27, 2022
Income tax provision at the U.S. Federal statutory rate	$	5,629		$	3,893
State and local income taxes, net of U.S. Federal income tax benefit		1,339			1,003
Change in uncertain tax positions, net		63			33
Nondeductible meals and entertainment and other		(45	)		(77	)
Nondeductible executive compensation		195			88
Total provision for income taxes	$	7,181		$	4,940

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 26,		March 27,
	2023		2022
Deferred tax assets
Accrued expenses	$	348	$	324
Allowance for doubtful accounts		120		61
Interest expense		-		381
Deferred revenue		402		519
Deferred stock compensation		78		69
Operating lease liability		1,550		1,894
Other		135		123
Total deferred tax assets	$	2,633	$	3,371
Deferred tax liabilities
Deductible prepaid expense	$	147	$	240
Operating lease right-of-use asset		1,390		1,692
Depreciation expense		549		637
Amortization		172		220
Total deferred tax liabilities		2,258		2,789
Net deferred tax asset	$	375	$	582

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 26, 2023 and March 27, 2022.

	March 26, 2023			March 27, 2022
Unrecognized tax benefits, beginning of year	$	403		$	397
Decreases of tax positions taken in prior years		(16	)		(19	)
Increases based on tax positions taken in current year		45			38
Settlements of tax positions taken in prior years		-			(13	)
Unrecognized tax benefits, end of year	$	432		$	403

The amount of unrecognized tax benefits included in Other liabilities at March 26, 2023 and March 27, 2022 were $432 and $403, respectively, all of which would impact Nathan’s effective tax rate, if recognized. As of March 26, 2023 and March 27, 2022, the Company had $305 and $271, respectively, accrued for the payment of interest and penalties. For the fiscal years ended March 26, 2023 and March 27, 2022 Nathan’s recognized interest and penalties in the amounts of $33 and $15, respectively.

During the fiscal year ending March 31, 2024, we believe it is reasonably possible the amount of unrecognized tax benefits, excluding the related accrued interest and penalties, could be reduced by up to $19, due primarily to the lapse of statutes of limitations which would favorably impact Nathan’s effective tax rate, although no assurances can be given in this regard.

On August 16, 2022, the United States enacted the Inflation Reduction Act. Among other provisions, this new law imposes a 1% excise tax on stock buybacks made after December 31, 2022, with certain exceptions including stock repurchases of less than $1,000 within a tax year. We are not expecting this new law to have a material effect on our consolidated financial statements.

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

Jurisdiction	Fiscal Year
Federal	2020
New York State	2020
New York City	2020
New Jersey	2019
California	2019