Note 7 - Income Taxes

3 Months Ended

Dec. 30, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

7

) Income Taxes

Effective income tax rate

.

Our effective income tax rate was (

36.8%

) for the

three

-month period ended

December 30, 2017

compared with

33.7%

for the

three

-month period ended

December 31, 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. On

December 22, 2017,

the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from

35%

to

21%.

Based on the provisions of the Act, we remeasured our deferred tax liabilities and adjusted our estimated annual federal income tax rate to incorporate the lower corporate tax rate into our tax provision for the current quarter as the change represents a discrete item for purposes of income tax accounting. The remeasurement of deferred tax liabilities at the lower enacted corporate tax rate resulted in a

$3.7

million reduction of income tax expense. We are still in process of evaluating the income tax effect of the Act on the executive compensation limitations that will be effective for our fiscal year

2019.

Deferred income taxes.

As of

December 30, 2017,

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

$6.0

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

$7.4

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

2018,

but principally expire between

2018

and

2031.

We have also recorded gross deferred tax assets of

$71,000

for various state tax credits that begin to expire in

2019,

but principally expire between

2019

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

December 30, 2017

and

September 30, 2017,

we recorded a valuation allowance of

$254,000

and

$251,000,

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

December 30, 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.