Note 10 - Provision for Taxes

12 Months Ended

Dec. 25, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 10 —    Provision for Taxes

Income before taxes and the provision for taxes consisted of the following:

In Thousands	2021		2020			2019
Income before taxes:	$	30,549	$	32,922		$	8,934
Provision (benefit) for taxes:
Current
Federal	$	4,819	$	5,479		$	1,419
State		758		854			129
		5,577		6,333			1,548
Deferred
Federal		408		665			367
State		159		(10	)		(239	)
		567		655			128
	$	6,144	$	6,988		$	1,676

The provision for income taxes was computed based on financial statement income. A reconciliation of the provision for income taxes to the amount computed using the statutory rate follows:

In Thousands	2021			2020			2019
Income tax at statutory rate	$	6,415		$	6,914		$	1,876
Increase (decrease) in income tax resulting from
State tax expense, net of federal effect		724			668			(86	)
Federal true-ups		(38	)		(103	)		(60	)
Federal tax credits		(251	)		(114	)		(93	)
Captive insurance earnings		(456	)		(443	)		--
Incentive stock options		(214	)		(4	)		(1	)
Other		(36	)		70			40
Recorded provision for income taxes	$	6,144		$	6,988		$	1,676

The provision for income taxes was computed based on financial statement income. In accordance with FASB ASC 740, the Company has an uncertain tax position as of and for the years ended December 25, 2021 and December 26, 2020. Interest costs and penalties related to income taxes are classified as interest expense and selling, general and administrative costs, respectively in the Company’s financial statements. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and multiple state and foreign jurisdictions. The Company is subject to future examinations by federal, state and other tax authorities for all years after 2017.

The Company has state, net of federal benefit, research tax credit carryforwards of $244 thousand as of December 25, 2021. The state research tax credit carryforwards begin to expire in 2021. A valuation allowance has been established in the amount of $23 thousand as of December 25, 2021 related to the state tax credit carryforwards, leaving an ending deferred, net of federal benefit, in the amount of $221 thousand. The decrease in the valuation allowance relates to the statutory expiration of prior year credits. The valuation allowance is based on the historical results and estimated future results of the Company, as it is the judgment of management not all of these tax carryforward attributes will be realized before they begin to expire. In addition, the Company has foreign tax credit carryforwards of $95 thousand, as of December 25, 2021.

At December 25, 2021, the Company had domestic federal income taxes receivable of $631 thousand, domestic state income taxes receivable of $108 thousand, and transition tax payable of $387 thousand recorded. At December 26, 2020, the Company had domestic federal income taxes receivable of $180 thousand, domestic state income taxes payable of $123 thousand, and transition tax payable of $387 thousand recorded.

The components of the net deferred tax liabilities are as follows:

In Thousands	2021			2020
Assets
Valuation reserves	$	1,248		$	1,042
Stock based compensation		329			297
Federal and state credits		339			353
Lease obligation		515			378
Other		34			29
Net operating loss carry forward		--			2
Total assets		2,465			2,101
Liabilities
Property and equipment		(1,474	)		(1,024	)
Goodwill and intangible assets		(4,973	)		(4,685	)
Lease – right of use asset		(517	)		(376	)
Prepaid insurance		(237	)		(182	)
Total liabilities		(7,201	)		(6,267	)
Valuation Allowance
Beginning balance		(27	)		--
(Increase) Decrease during period		4			(27	)
Ending balance		(23	)		(27	)
	$	(4,759	)	$	(4,193	)

The following table reconciles the total amounts of unrecognized tax benefits:

In Thousands	2021		2020		2019
Balance at beginning of year	$	61	$	--	$	--
Increases related to prior year tax positions		-		-		-
Decreases related to prior year tax positions		-		-		-
Increases related to current year tax positions		-		61		-
Settlements		-		-		-
Closure of tax years		-		-		-
Balance at end of year	$	61	$	61	$	--

The total amount of unrecognized tax benefits, net of federal income tax benefits, of $48 thousand at December 25, 2021 and December 26, 2020, that if recognized, would affect the effective tax rate on income from continuing operations.

The Company had no accrued interest and penalties related to taxes, recognized as a liability, as of December 25, 2021.

The Company has assessed its risk associated with all tax return positions and believes its tax reserve estimate reflects its best estimate of the deductions and positions it will be able to sustain, or it may be willing to concede as part of a settlement. At this time, the Company does not anticipate any change in its tax reserves in the next twelve months. The Company will continue to monitor the progress and conclusion of all audits and will adjust its estimated liability as necessary.