Note 9 - Income Taxes

6 Months Ended

Sep. 23, 2012

Income Tax Disclosure [Text Block]

NOTE I – INCOME TAXES

The income tax provisions for the twenty-six week periods ended September 23, 2012 and September 25, 2011 reflect effective tax rates of 39.6% and 38.9%, respectively, which have been reduced from statutory rates by 1.0% and 1.8%, respectively,  for the differing effects of tax exempt interest income.

The amount of unrecognized tax benefits at September 23, 2012 was $322,000, all of which would impact Nathan’s effective tax rate, if recognized.  As of September 23, 2012, Nathan’s had $358,000 of accrued interest and penalties in connection with unrecognized tax benefits.

During the fiscal year ending March 31, 2013, 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 $35,000, 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 31, 2013 will be in the range of approximately 38.5% to 40.0%.  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.

The City of New York (“NYC”) has completed its examination of our tax returns for the tax years ended March 2008 through March 2010.  In July 2012, Nathan’s and NYC agreed to and settled the audit findings for an amount approximating the originally proposed findings, which had previously been accrued in Nathan’s consolidated financial statements for the fiscal year ended March 25, 2012. Nathan’s has also received notices from the State of Florida and the Commonwealth of Massachusetts that our tax returns for the fiscal years ended March 2008, March 2009 and March 2010 will be reviewed. The Commonwealth of Massachusetts has completed its review, including our tax return for the fiscal year ended March 2011. During the quarter ended September 23, 2012, we also resolved the findings by the Commonwealth of Massachusetts for approximately $3,000.