Note 6. Income Taxes

As of June 25, 2017, the Company had a gross amount of unrecognized tax benefits of $205,400 ($133,200 net of federal benefit). As of March 26, 2017, the Company had a gross amount of unrecognized tax benefits of $204,500 ($147,800 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 part of the provision for income taxes. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for the first three months of fiscal 2018 was an expense of $10,800 (net of federal benefit). The cumulative amount included in the consolidated balance sheet as of June 25, 2017 was $340,500 (net of federal benefit). The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for the first three months of fiscal 2017 was an expense of $13,400 (net of federal benefit). The cumulative amount of interest and penalties included in the consolidated balance sheet as of March 26, 2017 was $314,300 (net of federal benefit).

A reconciliation of the changes in the gross balance of unrecognized tax benefits, excluding interest, is as follows:



Beginning balance at March 26, 2017 of unrecognized tax benefit	$	204,500
Increases related to current period tax positions		900
Reductions as a result of a lapse in the applicable statute of limitations		—
Ending balance at June 25, 2017 of unrecognized tax benefits	$	205,400

The Company has adopted Accounting Standards Updated No. 2016-09 Topic 718, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), effective as of March 27, 2017. The new guidance requires all of the tax effects related to share-based payments to be recognized through the income statement and is effective for public entities for annual and interim reporting periods beginning after December 15, 2016. We will treat the tax effects of share-based compensation awards as discrete items in the interim reporting periods in which the windfalls or shortfalls occurred. As a result of the adoption of the ASU 2016-09, the effective rate is 3.25% higher than if the ASU 2016-09 was not adopted.