Income Taxes

6 Months Ended

Feb. 25, 2018

Income Tax Disclosure [Abstract]

Income Taxes

5. INCOME TAXES:

The Company’s effective tax rate for its fiscal second quarter ended February 25, 2018 was a negative (494.8)% as compared to negative (37.5)% for the quarter ended February 26, 2017. The year-to-date effective tax rate was also a similar tax benefit in the current year as well as for the prior year.

On December 22, 2017, H.R.1, known as the “Tax Cuts and Jobs Act,” was signed into law. Among other things, the Tax Cuts and Jobs Act permanently lowers the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate tax rate to 21%, U.S. generally accepted accounting principles require companies to re-value their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment. At November 26, 2017, the Company had a net deferred tax liability of approximately $1.1 million and it remained in a net liability position at February 25, 2018. After the revaluation of its net deferred tax liability, the Company recognized an overall income tax benefit of $663,000 during the fiscal quarter ending February 25, 2018.

The Company will continue to evaluate the effects of the new law on its effective tax rate as the law contains provisions for limiting the deductibility of interest expense, imposes limitations on the utilization of operating loss carryforwards, retroactively applies the 100% bonus depreciation deduction under the new tax legislation, which applies to qualified property placed in service after September 27, 2017 as well as the lowering of the corporate tax to 21% for a portion of the Company’s fiscal year.

The Company has also determined that certain of its activities the Company performs qualify for the Research & Development tax credit (R&D credit) as defined by Internal Revenue Code Section 41 which affects the Company’s effective tax rate.