Note 11 - Income Taxes

3 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

1

1

)          Income Taxes

The Company accounts for income taxes using the asset and liability method as codified in Topic

740.

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.

The Company recorded

$62,000

income tax expense for the

three

months ended

June 30, 2018

and

no

income tax expense for the

three

months ended

June 24, 2017.

In

April 2018,

the Franchise Tax Board (“FTB”) issued its response to the Appeal filed by the Company to dispute the original audit findings related an ongoing audit. As a result of this development, the accrued state tax liability was increased by

$62,000,

from

$45,000

to

$107,000.

The effective tax rate for the

three

months ended

June 30, 2018

and

June 24, 2017

was

0%

each year, primarily due to a valuation allowance recorded against the net deferred tax asset balance.

As of

June 30, 2018,

the Company had recorded

$122,000

for unrecognized tax benefits related to uncertain tax positions. The unrecognized tax benefit is netted against the non-current deferred tax asset on the Consolidated Balance Sheet. The Company does

not

expect the liability for unrecognized tax benefits to change materially within the next

12

months.

On

December 22, 2017,

the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered the Company’s U.S. statutory federal income tax rate from

35%

to

21%

effective

January 1, 2018,

and imposes new limitations on the utilization of losses incurred in tax years beginning after

December 31, 2017.

However, the enactment of the legislative changes has

not

affected the Company’s overall effective tax rate of

0%,

due to, as previously noted, a full valuation allowance recorded against the net deferred tax asset balance.