NOTE

- INCOME TAXES

The income tax provision consists of the following for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017:

	March 31 , 201 9		March 25, 2018			March 26, 2017
Federal
Current	$	5,385	$	1,077		$	3,024
Deferred		43		(474	)		79
Total Federal income tax		5,428		603			3,103
State and local
Current		2,447		917			1,195
Deferred		42		(38	)		21
Total State and local income tax		2,489		879			1,216
Total provision for income taxes	$	7,917	$	1,482		$	4,319

December 22, 2017,

the Enactment Date, President Trump signed the Tax Cuts and Jobs Act (“Tax Act”) into law which among other provisions, permanently reduces the top corporate tax rate from

percent to a flat

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

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 Qualified Improvement Property. However, the law as written does

not

permit restaurant companies to take advantage of the laws’ intention regarding the immediate expensing of Qualified Improvement Property.

The income tax provisions for the years ended

March 31, 2019

and

March 25, 2018

reflect effective tax rates of

26.9%

and

36.0%,

respectively. The Company's tax rate reflects the reduction of the Federal income tax rate to

21%

and blended

31%

rate pursuant to the Tax Act, respectively.

During the fiscal year ended

March 25, 2018,

pursuant to Staff Accounting Bulletin

No.

118

("SAB

No.

118"

), Nathan’s determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC

740,

Income Taxes, the Company recognized the effect(s) of the Tax Act on current and deferred income taxes in its financial statements. Nathan’s recorded a discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by

$245

6.0

percentage points during the year ended

March 25, 2018.

In accordance with the provisions of SAB

No.

118,

March 25, 2018

we considered amounts related to the Tax Act to be reasonably estimated. During the year fiscal year ended

March 31, 2019,

we refined and completed the accounting for the Tax Act as we obtained, prepared, and analyzed additional information and as additional legislative, regulatory, and accounting guidance and interpretations became available, resulting in an increase in the provision for income taxes of

$99

0.3

percentage points.

The total income tax provision for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017

differs from the amounts computed by applying the United States Federal income tax rate of

21%,

blended

31%

and

34%,

respectively to income before income taxes as a result of the following:

	March 31 , 201 9			March 25, 2018			March 26, 2017

Computed tax expense	$	6,176		$	1,275		$	4,013
State and local income taxes, net of Federal income tax benefit		1,875			506			797
Change in uncertain tax positions, net		86			98			(11	)
Nondeductible meals and entertainment and other		(66	)		21			61
Nondeductible compensation		57			-			118
Tax reform act		99			(245	)		-
Tax benefit share based payments		(310	)		(173	)		(659	)
Total provision for income taxes	$	7,917		$	1,482		$	4,319

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 31 ,		March 25,
	201 9		2018
Deferred tax assets
Accrued expenses	$	387	$	310
Allowance for doubtful accounts		58		40
Deferred revenue		955		291
Deferred stock compensation		70		166
Excess of straight line over actual rent		162		194
Investment		-		123
Other		85		97
Total deferred tax assets	$	1,717	$	1,221

Deferred tax liabilities
Deductible prepaid expense		210		280
Depreciation expense		783		882
Amortization		381		361
Total deferred tax liabilities		1,374		1,523
Net deferred tax asset (liability)	$	343	$	(302	)

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 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 31, 2019,

March 25, 2018

and

March 26, 2017.

	March 31, 2019			March 25, 2018			March 26, 2017

Unrecognized tax benefits, beginning of year	$	263		$	167		$	208
Decreases of tax positions taken in prior years		(8	)		(2	)		(31	)
Increases based on tax positions taken in current year		46			98			41
Settlements of tax positions taken in prior years		(48	)		-			(51	)
Unrecognized tax benefits, end of year	$	253		$	263		$	167

The amount of unrecognized tax benefits at

March 31, 2019,

March 25, 2018

and

March 26, 2017

were

$253,

$263

and

$167,

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

March 31, 2019

and

March 25, 2018,

the Company had

$245

and

$214,

respectively, accrued for the payment of interest and penalties. For the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017

Nathan’s recognized interest and penalties in the amounts of

$31,

$31

and

$29,

respectively. During the fiscal year ending

March 29, 2020,

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

$11

which would favorably impact Nathan’s effective tax rate, although

assurances can be given in this regard.

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. The effects of the review, which were

not

significant, have been factored into the Company’s effective tax rate for fiscal

2019.

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.

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

Jurisdiction	Fiscal Year
Federal	2016
New York State	2016
New York City	2016
New Jersey	2015
California	2015