Note 14 - Income Taxes

12 Months Ended

Sep. 27, 2014

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax liabilities and assets as of September 27, 2014 and September 28, 2013 are as follows:

	2014			2013
Deferred tax liabilities:
Depreciation	$	(275,000	)	$	(341,000	)
Amortization		(52,000	)		(52,000	)
Total deferred tax liabilities		(327,000	)		(393,000	)
Deferred tax assets:
Deferred compensation		160,000			187,000
Accrued expenses		217,000			246,000
Inventory		52,000			97,000
Other		9,000			17,000
Total deferred tax assets		438,000			547,000
Net deferred tax assets	$	111,000		$	154,000

We made cash income tax payments, net of refunds, of approximately $1,904,000, $2,073,000, and $1,700,000, in fiscal years 2014, 2013, and 2012, respectively.

Federal, state and foreign income tax provisions consist of the following:

	2014			2013		2012
Current:
Federal	$	1,125,000		$	2,002,000	$	2,037,000
State		20,000			34,000		46,000
Foreign		(150,000	)		16,000		234,000
		995,000			2,052,000		2,317,000
Deferred:
Federal		(11,000	)		159,000		(43,000	)
State		1,000			3,000		(4,000	)
Foreign		53,000			4,000		(19,000	)
		43,000			166,000		(66,000	)
Income tax expense	$	1,038,000		$	2,218,000	$	2,251,000

Income tax expense differs from the amounts computed by applying the statutory U.S. federal tax rate to income before income taxes as follows:

	2014			2013			2012
Computed tax at the U.S. statutory rate	$	1,234,000		$	2,477,000		$	2,538,000
Increases (decreases):
State income taxes, net of federal tax benefit		13,000			25,000			28,000
Differences between U.S. and foreign tax rates		(27,000	)		(65,000	)		(107,000	)
Officer's life insurance		(57,000	)		(60,000	)		(62,000	)
Domestic production deduction		(116,000	)		(198,000	)		(200,000	)
Other, net		(9,000	)		39,000			54,000
Income tax expense	$	1,038,000		$	2,218,000		$	2,251,000

We have adopted the provisions under ASC Topic 740, “Income Taxes” (“ASC 740”) which require that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense in our financial statements. We are not aware of any uncertain tax positions as of September 27, 2014 and September 28, 2013. In the normal course of business, we are subject to examination by taxing authorities. We do not expect to be subject to U.S. federal or state and local income tax examinations by tax authorities in filing jurisdictions for the years before tax year 2010 and Canadian tax examinations before the tax year 2011.

Span-America files income tax returns in the U.S. and various state and local jurisdictions. Span-Canada files separate income tax returns in Canada on an annual basis.  The resulting foreign income taxes and any applicable U.S. or foreign tax implications of intercompany transactions will be accounted for within the consolidated financial reporting of income taxes, per the requirements of ASC Topic 740.

A provision has not been made for U.S. or additional foreign taxes on $850,000 of undistributed earnings of our foreign subsidiary. Those earnings have been and will continue to be reinvested. These earnings could become subject to additional tax if they were remitted as dividends, if foreign earnings were loaned to Span-America or a U.S. affiliate, or if we sold our stock in the Span-Canada subsidiary. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings.