Note 9 - Income Taxes

6 Months Ended

Jun. 28, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(9) Income Taxes

Income tax expense differs from amounts computed by applying the federal statutory income tax rate to income from continuing operations before income taxes as follows:

	26 Weeks Ended
	June 28,			June 29,
	2015			2014
Income tax expense at statutory rates		35.0	%		35.0	%
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit		4.5	%		4.5	%
Federal employment tax credits		(7.1	%)		(7.9	%)
Other		(0.1	%)		1.0	%
Effective tax rate		32.3	%		32.6	%

The Company utilizes the federal FICA tip credit to reduce its periodic federal income tax expense. A restaurant company employer may claim a credit against the company’s federal income taxes for FICA taxes paid on certain tip wages (the FICA tip credit). The credit against income tax liability is for the full amount of eligible FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into account in determining the credit.

Income taxes applicable to discontinued operations are comprised of (a) taxes calculated at the composite federal and state statutory tax rate times the pre-tax loss plus (b) the FICA tip credit benefit attributable to the restaurant sales of the Mitchell’s Restaurants. A reconciliation of the U.S. statutory tax rate to the effective tax rate applicable to discontinued operations for the first twenty-six weeks of fiscal years 2015 and 2014 follows:

	26 Weeks Ended
	June 28,			June 29,
	2015			2014
Income tax expense at statutory rates		(319	)		(147	)
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit		(41	)		(19	)
Other, primarily federal FICA tip credit net benefit		(42	)		(364	)
		(402	)		(530	)
Effective tax rate		44.2	%		126.6	%

During all periods presented, the FICA tip credit net benefit had a disproportionate impact on the income tax rate applicable to discontinued operations due to the Mitchell’s Restaurants generally operating near break even from operations before income taxes.

The Company files consolidated and separate income tax returns in the United States Federal jurisdiction and many state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal income or state tax examinations for years before 2010.