NOTE 12 - FEDERAL AND STATE INCOME TAXES

12 Months Ended

Dec. 26, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 12 - FEDERAL AND STATE INCOME TAXES

The components of income tax expense (benefit) from continuing operations for the years ended December 26, 2015 and December 27, 2014 were as follows (dollars in thousands):

	2015			2014
Current:
Federal	$	(21	)	$	160
Foreign Tax		805			—
State		139			472
Total current		923			632
Deferred:
Federal		(8,631	)		—
State		(506	)		—
Total deferred		(9,137	)		—
Total tax provision	$	(8,214	)	$	632

The following is a reconciliation of expected tax expense to actual expense from continuing operations for the years ended December 26, 2015 and December 27, 2014 (dollars in thousands):

	2015			2014
Federal income tax expense/(benefit) at 35% for 2015 and 2014	$	813		$	2,332
State income tax, net of federal income tax effect		(416	)		433
Nondeductible expenses		222			220
Research and development credit		(297	)		(427	)
Prior year adjustments		2,424			(1,221	)
Change in valuation allowance		(10,960	)		(705	)
Total tax provision	$	(8,214	)	$	632

The components of the deferred tax asset (liability) consisted of the following at December 26, 2015 and December 27, 2014 (dollars in thousands):

	2015			2014
Deferred tax asset (liabilities)
Federal net operating loss carry-forward	$	4,339		$	3,944
Tax credit carryforwards		1,873			587
Allowance for uncollectible accounts		616			1,881
Accruals not yet deductible for tax purposes		1,182			2,345
Goodwill		1,122			1,573
Depreciation		64			288
Other		464			865
Deferred tax assets		9,660			11,483
Less: Valuation allowance		(523	)		(11,483	)
Deferred tax assets, net		9,137			—

We account for deferred income taxes in accordance with FASB ASC Topic 740 (“ASC 740”), which provides for deferred taxes using an asset and liability method.  We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities including net operating loss and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.  The provision for income taxes represents the current taxes payable or refundable for the period plus or minus the tax effect of the net change in the deferred tax assets and liabilities during the period.  Tax law and rate changes are reflected in income in the period such changes are enacted. Valuation allowances are provided, if based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. During 2015, we decreased the valuation allowances by approximately $11 million primarily related to net operating carryforwards, various accruals and basis differences in its fixed assets and intangibles.

We account for uncertain tax positions in accordance with ASC 740.  When uncertain tax positions exist, we recognize the tax benefit of the tax positions to the extent that the benefit will more likely than not be realized.  The determination as to whether the tax benefit will more likely than not be realized is based upon technical merits of the tax positions as well as consideration of the available facts and circumstances.  The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 26, 2015 and December 27, 2014, we do not have any significant uncertain tax positions.

For the year ended December 26, 2015, we recognized an income tax benefit of $8.2 million compared to an expense of $632 thousand for year ended December 27, 2014. The significant benefit recognized during 2015 primarily related to the reversal of the valuation allowance on certain of our deferred tax assets. The assessment of the valuation allowance is highly judgmental and we are required to consider all available positive and negative evidence in evaluating the likelihood that the will be able to realize the benefit of our deferred tax assets in the future.  Such evidence includes projected future income, tax planning strategies, and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is significant judgment involved, and our conclusion could be materially different should certain of our expectations not transpire. The Company has continued to generate pretax book income over the most recent years.

We had a federal net operating loss carry-forward at December 26, 2015 of approximately $11.5 million, which will begin to expire starting in 2021.  At December 26, 2015, we had Alternative Minimum Tax (AMT) and federal research and development tax credit carryforwards of approximately $0.1 and $0.9 million respectively, available to reduce future tax liabilities.  The AMT credit is available for an indefinite carryforward period and the research and development tax credit will begin to expire starting in 2030.  During 2015, the Company recorded approximately $0.8 million of foreign tax expense and recorded a corresponding deferred tax asset on these taxes, which may be able to be utilized in the future. Due to the uncertainty of realization, the Company has recorded a valuation allowance of $0.5 million against this asset as of December 26, 2015. These foreign tax credits will expire in 2025.