Note 7 - Income Taxes

9 Months Ended

Jul. 01, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

7

) Income Taxes

Effective income tax rate

.

Our effective income tax rate was

33.8%

for the

nine

-month period ended

July 1, 2017

compared with

34.0%

for the

nine

-month period ended

July 2, 2016.

The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant items related specifically to interim periods.

Deferred income taxes.

As of

July 1, 2017,

we recorded a deferred tax liability (net of valuation allowance) of

$8.2

million in other liabilities on our consolidated balance sheet. We have

$7.5

million of state net operating loss carryforwards (“NOLs”) that begin to expire in

2017,

but principally expire between

2017

and

2031.

We have also recorded

$87,000

of gross deferred tax assets for various state tax credits that begin to expire in

2018,

but principally expire between

2018

and

2020.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we

no

longer believe it is more likely than

not

that they will be fully realized. As of

July 1, 2017

and

October 1, 2016,

we recorded a valuation allowance of

$253,000

and

$280,000,

respectively, pertaining to various state NOLs and tax credits that were

not

expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than

not.

Uncertainty in income taxes

.

As of

July 1, 2017,

we had

no

material, known tax exposures that require the establishment of contingency reserves for uncertain tax positions.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to

2012

remain subject to examination.