Note 15 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15.

     INCOME TAXES

The components of income tax expense (benefit) are as follows:

	Fiscal Years Ended
	December 31, 2016			January 2, 2016
Current
Federal	$	688		$	(570	)
State and local		402			320
Foreign		(3	)		81
		1,087			(169	)
Deferred
Federal		372			944
State		108			274
Foreign		(23	)		90
		457			1,308
Total	$	1,544		$	1,139

The components of earnings before income taxes by United States and foreign jurisdictions were as follows:

	Fiscal Years Ended
	December 31, 2016			January 2, 2016
United States	$	3,430		$	6,642
Foreign Jurisdictions		(128	)		512
	$	3,302		$	7,154

The consolidated effective income tax rate for the current year was

46.8%

as compared to

15.9%

for the comparable prior year period. Generally, the Company’s relative income or loss generated in each of its jurisdictions can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian pretax income, which typically has statutory income tax rates of under

30.0%,

versus U.S. pretax income. The Company’s fiscal

2016

effective tax rate is unusually high due to the following reasons:

1)

a small pretax loss in the Company’s Canadian operations; and

2)

normal permanent differences and fixed tax rates in Puerto Rico as both items were spread over a low base of pretax income in the United States. The Company’s fiscal

2015

effective tax rate is unusually low primarily due to a discreet write-off of tax goodwill (GAAP book value was

zero)

associated with the sale of a business unit in the Company’s Information Technology segment. The income tax provisions reconciled to the tax computed at the statutory Federal rate are:

	December 31, 2016			January 2, 2016
Tax at statutory rate		34.0	%		34.0	%
State and Puerto Rico income taxes, net of Federal income tax benefit		8.0			5.4
Permanent differences		5.7			2.2
Foreign income tax rate		0.5			-
Tax loss on sale of business unit		-			(26.9	)
Other, net		(1.4	)		1.2
Total income tax expense		46.8	%		15.9	%

A reconciliation of the unrecognized tax benefits for the year

December

31,

2016:

Unrecognized Tax Benefits
Balance as of January 2, 2016	$	628
Charges for current year tax positions		-
Reserves for current year tax position		-
Balance as of December 31, 2016	$	628

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will not change during the next

12

 months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future.

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to interest expense.  The Company recorded

no

expense for penalties or interest in the fiscal years ended

December

31,

2016

and

January

2,

2016.

At

December

31,

2016

and

January

2,

2016,

deferred tax assets and liabilities consist of the following:

	December 31, 2016			January 2, 2016
Deferred tax assets:
Allowance for doubtful accounts	$	451		$	501
Acquisition amortization, net		-			352
Reserves and accruals		394			393
Other		323			128
Total deferred tax assets		1,168			1,374
Deferred tax liabilities:
Acquisition amortization, net		(100	)		-
Prepaid expense deferral		(750	)		(491	)
Bonus depreciation to be reversed		(466	)		(550	)
Canada deferred tax liability, net		(234	)		(250	)
Total deferred tax liabilities		(1,550	)		(1,291	)
Total deferred tax (liability) asset, net	$	(382	)	$	83

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada

and Puerto Rico. The Company and its subsidiaries file a consolidated U.S. Federal income tax return and file in various states. The Company’s federal income tax returns have been examined through

2010.

The Internal Revenue Service is currently examining fiscal tax years

2011

and

2012.

The State of New Jersey is currently examining fiscal tax years

2009

through

2012.

Except for New Jersey and other limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to

2010.

The Company is no longer subject to audit in Canada for the tax years prior to tax year

2012.

The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year

2006.