Note K - Income Taxes

6 Months Ended

Sep. 23, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE K – INCOME TAXES

On

December 22, 2017,

the Tax Cuts and Jobs Act, (The “Tax Act”) was enacted which among other provisions, permanently reduces the top corporate tax rate from

35

percent to a flat

21

percent beginning

January 1, 2018

and eliminates the corporate Alternative Minimum Tax.  The Tax Act limits the deduction of business interest, net of interest income, to

30

percent of the adjusted taxable income of the taxpayer in any taxable year.  Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year.  Disallowed interest will have an indefinite carryforward.  The Tax Act also repeals the performance-based exception to the

$1.0

million deduction limitation on executive compensation and modifies the definition of “covered employees”. Additionally, the Tax Act intended to allow businesses to immediately expense the full cost of new equipment. However, the law as written does

not

currently permit restaurant companies to take advantage of the laws’ intention.

The income tax provisions for the

twenty-six

week periods ended

September 23, 2018

and

September 24, 2017

reflect effective tax rates of

28.5%

and

39.4%,

respectively. The majority of the decline in the Company’s tax rate is due to the reduction in our Federal income tax rate from

34%

to

21%

pursuant to the Tax Act. Nathan’s effective tax rates for the

twenty-six

week periods ended

September 23, 2018

and

September 24, 2017

were reduced by

0.4%

and

1.9%,

respectively, as a result of the tax benefits associated with stock compensation. For the

twenty-six

week periods ended

September 23, 2018

and

September 24, 2017,

excess tax benefits of

$46,000

and

$194,000,

respectively, were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes.

The amount of unrecognized tax benefits at

September 23, 2018

was

$250,000,

all of which would impact Nathan’s effective tax rate, if recognized. As of

September 23, 2018,

Nathan’s had

$238,000

of accrued interest and penalties in connection with unrecognized tax benefits.

In

January 2018,

Nathan’s received notification from the State of Virginia that it was seeking to review Nathan’s tax returns for the period

April 2014

through

March 2017.

The review has been completed; Nathan’s has accepted the findings and settled the matter in the

second

quarter fiscal

2019.

The effects of the review have been factored into the Company’s effective tax rate for fiscal

2019.

Nathan’s estimates that its annual tax rate for the fiscal year ending

March 31, 2019

will be in the range of approximately

27.0%

to

30.0%

excluding the impact of any discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, 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. In addition, the ultimate benefit of the Tax Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by deduction limitations and other provisions included in further guidance and regulations.