Note M - Income Taxes

9 Months Ended

Dec. 27, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE M – INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020. Additionally, the CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018.

The income tax provisions for the thirty-nine week periods ended December 27, 2020 and December 29, 2019 reflect effective tax rates of 27.7% and 26.1%, respectively.

Nathan’s effective tax rate for the thirty-nine week period ended December 29, 2019 was reduced by 1.6% as a result of the tax benefits associated with stock compensation. For the thirty-nine week period ended December 29, 2019 excess tax benefits of $228,000 were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes. Nathan’s effective tax rate without this adjustment would have been 27.8% for the fiscal 2020 period.

The amount of unrecognized tax benefits at December 27, 2020 was $336,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December 27, 2020, Nathan’s had $292,000 of accrued interest and penalties in connection with unrecognized tax benefits.

In November 2019, the State of New Jersey notified Nathan’s that our tax returns for the fiscal years ended March 27, 2016, March 26, 2017 and March 25, 2018 will be audited. In November 2020, the audit was completed and no adjustments were noted.