Note 12. Income Taxes

A reconciliation of the difference between the provision for income taxes computed at statutory rates and the provision for income taxes provided in the consolidated statements of income is as follows:

	2015			2014			2013

Statutory federal rate		34.2	%		35.0	%		35.0	%
State taxes, net of federal benefit		4.1			3.3			2.9
Non-deductible expenses		0.9			0.7			0.5
Other		0.0			(0.8	)		0.2
Effective rate		39.2	%		38.2	%		38.6	%

The provision for income taxes was comprised of the following:

	2015		2014			2013

Federal: Current	$	3,035,400	$	9,252,700		$	10,593,200
Deferred		1,964,800		(396,600	)		(929,600	)
State: Current		398,500		1,212,400			1,640,400
Deferred		178,100		(5,400	)		(103,500	)
Provision for income taxes		5,576,800	$	10,063,100		$	11,200,500

Total deferred tax assets and deferred tax liabilities as of March 29, 2015 and March 30, 2014, and the sources of the differences between financial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets and liabilities, are as follows:

	2015		2014
Deferred tax assets:
Deferred compensation	$	802,700	$	1,260,000
Accrued vacation		554,100		428,700
Deferred rent		687,500		886,800
Allowance for doubtful accounts		232,800		374,300
Inventory reserves		2,175,500		1,530,000
Sales tax reserves		459,600		472,700
Other assets		516,000		1,660,600
Restricted Stock		89,600		--
Tax contingency reserve		286,200		299,900
Total deferred tax assets	$	5,804,000	$	6,913,000

Deferred tax liabilities:
Depreciation and amortization		3,354,600		3,549,700
Other liabilities		312,400		287,300
Accrued compensation		873,700		--
Prepaid expenses		767,400		423,700
Total deferred tax liabilities	$	5,308,100	$	4,260,700

Net Deferred Tax Asset	$	495,900	$	2,652,300

The Company has reviewed its deferred tax assets realization and has determined that no valuation allowance is required as of March 29, 2015 or March 30, 2014.

As of March 29, 2015, the gross amount of unrecognized tax benefits was $394,400 ($256,400 net of federal benefit). As of March 30, 2014, the Company had gross unrecognized tax benefits of $1,665,000 ($309,400 net of federal benefit).

The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as income taxes. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2015 was a benefit of $31,600 (net of federal expense) and the cumulative amount included as a liability in the consolidated balance sheet as of march 29, 2015 was $323,800 (net of federal expense). The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2014 was a benefit of $23,300 (net of federal benefit) and the cumulative amount included in the consolidated balance sheet as of March 30, 2014 was $295,500 (net of federal benefit). The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2013 was an expense of $71,300 (net of federal benefit).

As of March 29, 2015, the total net amount of unrecognized tax benefits, inclusive of indirect tax benefits and deferred tax benefits was $256,400 and associated penalties and interest were $323,800. The net amount of $580,200, if recognized, would affect the effective tax rate. The Company’s unrecognized tax benefits increased by $1,189,000 during the fiscal year ended March 30, 2014, due to its tax accounting method for certain accrued expenses. The Company’s unrecognized tax benefit decreased by $1,189,000 and such amount was reclassified to income taxes payable during fiscal 2015 due to the Company filing an automatic change to its method of accounting for certain accrued expenses with the IRS during the first quarter of fiscal 2015.

A reconciliation of the changes in the gross balance of unrecognized tax benefit amounts, net of interest, is as follows:

	2015			2014			2013
Beginning balance of unrecognized tax benefit	$	1,665,000		$	631,100		$	561,600
Decrease due to reclassification to income tax payable		(1,189,000	)		1,189,000			--
Increases related to current period tax positions		10,600			22,800			69,500
Reductions as a result of a lapse in the applicable statute of limitations		(92,200	)		(177,900	)		--
Ending balance of unrecognized tax benefits	$	394,400		$	1,665,000		$	631,100

The Company files income tax returns in U.S. federal, state and local jurisdictions. Income tax returns filed for fiscal years 2008 and earlier are no longer subject to examination by U.S. federal, state and local tax authorities. No federal, state and local income tax returns are currently under examination.

Certain income tax returns for fiscal years 2009 through 2015 remain open to examination by U.S. federal, state and local tax authorities.