Income Taxes

3 Months Ended

Jun. 03, 2023

Income Taxes

Income Taxes

6. Income Taxes

The Company recorded an income tax expense of $1,493 and $3,497 for the thirteen week periods ended June 3, 2023 and May 28, 2022, respectively. The effective tax rate for the thirteen week periods ended June 3, 2023 and May 28, 2022 was (0.5)% and (4.3)%, respectively. The effective tax rate for the thirteen week periods ended June 3, 2023 May 28, 2022 was net of an adjustment of (27.6)% and (37.5)%, respectively, to adjust the valuation allowance against deferred tax assets.

The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

The Company believes that it is reasonably possible that a decrease of up to $4,001 in unrecognized tax benefits related to state exposures may be necessary in the next twelve months; however, management does not expect the change to have a material impact on the results of operations or the financial position of the Company.

The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. The Company continues to maintain a valuation allowance against net deferred tax assets of $1,720,476 and $1,636,461, which relates to federal and state deferred tax assets that may not be realized based on the Company's future projections of taxable income at June 3, 2023 and March 4, 2023, respectively.