Note J - Income Taxes

6 Months Ended

Sep. 25, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE J – INCOME TAXES

The income tax provisions for the twenty-six week periods ended September 25, 2016 and September 27, 2015 reflect effective tax rates of 36.9% and 40.9%, respectively. Nathan’s effective tax rate was reduced by 6.4% during the fiscal 2017 period as a result of a discrete

tax benefit associated with stock compensation guidance from FASB that was recently adopted by the Company. This favorable tax benefit was partially offset by an estimated unfavorable discrete adjustment of a prior years’ tax position which increased Nathan’s effective tax rate during the fiscal 2017 period by 1.2%.

During the fiscal 2016 period, the Company’s tax rate was negatively affected by 1.0% due to lost interest deductions arising from its investments in municipal securities. The Company’s tax rate was favorably affected by 0.2% and 0.1% during the fiscal 2016 period, due to the settlement of an uncertain tax position and effects of tax-exempt interest income, respectively. For the twenty-six week period ended September 25, 2016, excess tax benefits of $621,000 associated with stock compensation

were reflected in the Consolidated Statements of Earnings as a component of the provision for income taxes as a result of the early adoption of guidance addressing how companies account for certain aspects of its share-based payments to employees. Please refer to Note B for more details regarding the adoption.

In June 2016, Nathan’s received notification from the Internal Revenue Service that it is seeking to review Nathan’s federal tax return for the period April 1, 2014 through March 31, 2015. The income tax examination is still ongoing. While it is difficult to predict the final outcome or the timing of resolution of any particular tax matter. Nathan’s believes its liability for unrecognized tax benefits is adequate.

The amount of unrecognized tax benefits at September 25, 2016 was $223,000, all of which would impact Nathan’s effective tax rate, if recognized. As of September 25, 2016, Nathan’s had $221,000 of accrued interest and penalties in connection with unrecognized tax benefits.

During the fiscal year ending March 26, 2017, Nathan’s will seek to settle additional uncertain tax positions with the tax authorities. As a result, it is reasonably possible the amount of unrecognized tax benefits, excluding the related accrued interest and penalties, could be reduced by up to $31,000, which would favorably impact Nathan’s effective tax rate, although no assurances can be given in this regard.

Nathan’s estimates that its annual effective

tax rate for the fiscal year ending March 26, 2017 will be in the range of approximately 42.0% to 44.0%, excluding the impact of the excess tax benefit associated with stock compensation and the potential impact of any reduction to the Company’s unrecognized tax benefits and related accrued interest and penalties

. The final annual effective

tax rate is subject to many variables, including the ultimate determination of revenue and income tax provision

by state and local tax jurisdiction

, among other factors, and therefore cannot be determined until the end of the fiscal year; therefore, the actual effective

tax rate could differ from our current estimates.