Note 9 - Income Taxes

9 Months Ended

Dec. 25, 2011

Income Tax Disclosure [Text Block]

NOTE I – INCOME TAXES

The income tax provisions for the thirty-nine -week periods ended December 25, 2011 and December 26, 2010 reflect effective tax rates of 38.7% and 32.9%, respectively, which have been reduced from statutory rates by 2.0% and 9.6%, respectively,  for the differing effects of tax exempt interest income.  During the thirty-nine -week period ended December 26, 2010, Nathan’s settled uncertain tax positions with one state jurisdiction and accordingly reduced the associated unrecognized tax benefits, including the related accrued interest and penalties, by approximately $79,000, further reducing the December 26, 2010 effective tax rate by 3.2% for the period. During the thirty-nine week period ended December 26, 2010, Nathan’s recorded additional taxes of $85,000 in connection with the filing of its March 2010 tax returns, increasing the effective tax rate by 3.4%.

The amount of unrecognized tax benefits at December 25, 2011 was $326,000, all of which would impact Nathan’s effective tax rate, if recognized.  As of December 25, 2011, Nathan’s had $369,000 of accrued interest and penalties in connection with unrecognized tax benefits.

During the fiscal year ending March 25, 2012, Nathan’s will seek to settle additional uncertain tax positions with the tax authorities. As a result, it is reasonably possible that the amount of unrecognized tax benefits, including the related accrued interest and penalties, could be reduced by up to $60,000, which would favorably impact Nathan’s effective tax rate, although no assurances can be given in this regard.

Nathan’s estimates that its annual tax rate for the fiscal year ending March 25, 2012 will be in the range of approximately 37.5% to 39.5%.  The final annual tax rate is subject to many variables, including the effect of tax-exempt interest earned, among other factors, and therefore cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates.

Nathan’s has received notices from New York City and the States of Florida and Massachusetts that our tax returns for the fiscal years ended March 2008, March 2009 and March 2010 will be reviewed. Additionally, the State of Massachusetts has indicated that our tax return for the fiscal year ended March 2011 will also be reviewed.