NOTE J - INCOME TAXES

The income tax provision consists of the following for the fiscal years ended March 27, 2016, March 29, 2015 and March 30, 2014:

	March 27, 2016			March 29, 2015		March 30, 2014
Federal
Current	$	3,176		$	5,992	$	2,664
Deferred		(11	)		60		1,421
		3,165			6,052		4,085
State and local
Current		1,135			1,599		918
Deferred		(12	)		51		231
		1,123			1,650		1,149
	$	4,288		$	7,702	$	5,234

The total income tax provision for the fiscal years ended March 27, 2016, March 29, 2015 and March 30, 2014 differs from the amounts computed by applying the United States Federal income tax rate of

34%, 35% and 34%, respectively to income before income taxes as a result of the following:

	March 27, 2016			March 29, 2015			March 30, 2014

Computed “expected” tax expense	$	3,531		$	6,792		$	4,611
State and local income taxes, net of Federal income tax benefit		826			1,112			773
Tax-exempt investment earnings		(9	)		(63	)		(110	)
Change in uncertain tax positions, net		(129	)		(62	)		(22	)
Nondeductible meals and entertainment and other		69			(77	)		(18	)
	$	4,288		$	7,702		$	5,234

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

	March 27 ,			March 29,
	2016			2015
Deferred tax assets
Accrued expenses	$	236		$	145
Allowance for doubtful accounts		62			52
Deferred revenue		393			432
Deferred stock compensation		271			223
Excess of straight line over actual rent		379			412
Investment		151			152
Other		119			140
Total gross deferred tax assets	$	1,611		$	1,556

Deferred tax liabilities
Deductible prepaid expense		263			288
Unrealized gain on marketable securities		-			16
Depreciation expense		1,717			1,692
Amortization		344			311
Total gross deferred tax liabilities		2,324			2,307
Net deferred tax (liability)	$	(713	)		(751	)

A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We consider the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. Based upon these considerations, management believes that it is more likely than not that the Company will realize the benefit of its gross deferred tax asset.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the fiscal years ended March 27, 2016, March 29, 2015 and March 30, 2014.

	March 27, 2016			March 29, 2015			March 30, 2014

Unrecognized tax benefits, beginning of year	$	266		$	283		$	296
Decreases of tax positions taken in prior years		(98	)		(64	)		(34	)
Increases based on tax positions taken in current year		43			47			21
Settlements of tax positions taken in prior years		(3	)		-			-
Unrecognized tax benefits, end of year	$	208		$	266		$	283

The amount of unrecognized tax benefits at March 27, 2016, March 29, 2015 and March 30, 2014 were $208, $266 and $283, respectively, all of which would impact Nathan’s effective tax rate, if recognized. As of March 27, 2016 and March 29, 2015, the Company had $200 and $289, respectively, accrued for the payment of interest and penalties. For the fiscal years ended March 27, 2016, March 29, 2015 and March 30, 2014 Nathan’s recognized interest and penalties in the amounts of $34, $44 and $43, respectively. The Company believes that it is reasonably possible that decreases in unrecognized tax benefits of up to $31

may be recorded within the next year.

In May 2014, Nathan’s received notification from the Internal Revenue Service that it is seeking to review its tax return for the year ended March 31, 2013. Subsequent to March 27, 2016, we received confirmation that the review was concluded without adjustment.

In June 2015, Nathan’s received notification from the New York State Department of Taxation and Finance that it will review Nathan’s tax returns for the period April 1, 2011 through March 31, 2014. Fieldwork has been completed and we are awaiting the final conclusion of the New York State review.

The earliest tax years’ that are subject to examination by taxing authorities by major jurisdictions are as follows:

Jurisdiction		Fiscal Year
Federal		2013
New York State		2012
New York City		2013