Note 13 - Income Taxes

12 Months Ended

Oct. 03, 2015

. 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 October 3, 2015 and September 27, 2014 are as follows:

	2015			2014
Deferred tax liabilities:
Depreciation	$	(383,000	)	$	(275,000	)
Amortization		(99,000	)		(52,000	)
Total deferred tax liabilities		(482,000	)		(327,000	)

Deferred tax assets:
Deferred compensation		131,000			160,000
Accrued expenses		302,000			217,000
Inventory		62,000			52,000
Other		(10,000	)		9,000
Total deferred tax assets		485,000			438,000
Net deferred tax assets	$	3,000		$	111,000

We made cash income tax payments, net of refunds, of approximately $524,000, $1,904,000, and $2,073,000 in fiscal years 2015, 2014, and 2013, respectively.

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

	2015		2014			2013
Current:
Federal	$	1,166,000	$	1,125,000		$	2,002,000
State		34,000		20,000			34,000
Foreign		349,000		(150,000	)		16,000
		1,549,000		995,000			2,052,000
Deferred:
Federal		102,000		(11,000	)		159,000
State		8,000		1,000			3,000
Foreign		13,000		53,000			4,000
		123,000		43,000			166,000
Income tax expense	$	1,672,000	$	1,038,000		$	2,218,000

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

	2015			2014			2013
Computed tax at the U.S. statutory rate	$	1,926,000		$	1,234,000		$	2,477,000
Increases (decreases):
State income taxes, net of federal tax benefit		27,000			13,000			25,000
Differences between U.S. and foreign tax rates		(191,000	)		(27,000	)		(65,000	)
Officer's life insurance		(15,000	)		(57,000	)		(60,000	)
Domestic production deduction		(115,000	)		(116,000	)		(198,000	)
Other, net		40,000			(9,000	)		39,000
Income tax expense	$	1,672,000		$	1,038,000		$	2,218,000

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 consolidated 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 consolidated financial statements. We are not aware of any uncertain tax positions as of October 3, 2015 and September 27, 2014. 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 2011 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 $2,500,000 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.