INCOME TAXES

The Company is required to analyze all material positions it has taken or plans to take in all tax returns that have been filed or should have been filed with all taxing authorities for all years still subject to challenge by those taxing authorities. If the position taken is “more-likely-than-

not”

to be sustained by the taxing authority on its technical merits and if there is more than a

50%

likelihood that the position would be sustained if challenged and considered by the highest court in the relevant jurisdiction, the tax consequences of that position should be reflected in the taxpayer’s financial statements.

The Company had

material unrecognized tax positions at

July 1, 2018

nor does it expect any significant change in that status during the next

twelve

months.

accrued interest or penalties on uncertain tax positions have been included on the consolidated statements of earnings and comprehensive earnings or the consolidated balance sheet. Should the Company adopt tax positions for which it would be appropriate to accrue interest and penalties, such costs would be reflected in the tax expense for the period in which such costs accrued. The Company is subject to U.S. Federal income tax and to several state jurisdictions. Returns filed for tax periods ending after

June 29, 2014

are still open to examination by those relevant taxing authorities.

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes broad and complex changes to the U.S. tax code, including a reduction in the U.S. federal corporate tax rate from

percent to

percent effective

January 1, 2018.

For fiscal

2018,

the Company recorded its income tax provision based on a blended U.S. statutory tax rate of

27.5

percent, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of

percent will apply for fiscal

2019

and beyond.

The Tax Act also puts in place new tax laws that

may

impact the Company’s taxable income beginning in fiscal

2019,

which include, but are

not

limited to (i) reducing the dividends received exclusion, (ii) adding a provision that could limit the amount of deductible interest expense, and (iii) limiting the deductibility of certain executive compensation. Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a

one

-year measurement period during which a company

may

complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company

may

determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.

During the

second

quarter of fiscal

2018,

the Company recorded a provisional discrete tax benefit of

$604,190

related to the Tax Act. The Company adjusted its U.S. deferred tax liabilities by

$604,190

due to the reduction in the U.S. federal corporate tax rate. At

July 1, 2018,

the Company has finalized the reduction in deferred tax liabilities as

$651,807

which increased the year to date earnings per share by approximately

$.13

cents. This net reduction in deferred tax liabilities also included the estimated impact on the Company’s net state deferred tax liabilities.

The significant components of the Company's deferred tax assets and liabilities were as follows:

	Ju ly 1, 20 1 8		July 2, 2017
Deferred tax assets:
Other	$	20,723	$	8,162
Total deferred tax assets		20,723		8,162
Deferred tax liabilities:
Land, buildings, and equipment		418,254		521,818
Unrealized gain on available-for-sale securities		905,056		1,529,585
Prepaid expenses and other		9,110		(15,582	)
Total deferred tax liabilities		1,332,420		2,035,821
Net deferred income taxes	$	1,311,697	$	2,027,659

Income tax expense differs from the amounts computed by applying the U.S. Federal income tax rate to income before tax for the following reasons:

	For the Years Ended
	20 1 8			2017
Taxes computed at statutory rate		27.5	%		34.0	%
State income taxes, net of Federal income tax benefit		3.6			3.2
Dividends received exclusion		(1.0	)		(1.8	)
Tax rate adjustment for change in tax law		(14.8	)		-
All other net		(1.3	)		(1.0	)
Net effective rate		14.0	%		34.4	%