INCOME TAXES

9 Months Ended

Jun. 26, 2020

NOTE 9—INCOME TAXES

The income tax expense during each of the three and nine months ended June 26, 2020 and June 28, 2019 follows:


	Three Months Ended						Nine Months Ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
(in thousands)
Income tax expense	$	550	$	221	$	1,253	$	736

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income, changes in tax laws, business reorganizations, and settlements with taxing authorities, if any.

In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the three and nine months ended June 26, 2020, there were no material tax impacts to our condensed consolidated financial statements as it relates to COVID-19 measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

The CARES Act includes a provision which accelerates the refund of alternative minimum tax (“AMT”) credits to allow a full utilization or refund of the remaining credits beginning in tax year 2019. As the Company expects to have net operating loss carryforward to offset its 2019 taxable income in full, the AMT credit should be refundable in full. As such, at June 26, 2020, the Company reclassified the remaining portion of its AMT credit from deferred income tax to federal income tax receivable in the condensed consolidated balance sheet.

The Company's estimated annual effective tax rate for fiscal 2020 is comprised of the federal tax rate of 21% plus the state tax rate of 1.58%, which is adjusted for permanent book tax differences. During the three and nine months ended June 26, 2020, the permanent items included meals and entertainment and stock based compensation. There were no material discrete items recognized in the three and nine months ended June 26, 2020.