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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 27, 2019
INCOME TAXES |
INCOME TAXES | 11. INCOME TAXES The provision for income taxes is comprised of:
|  | Fiscal Year |
|  | 2019 |  | 2018 |  | 2017 |
|  | (in thousands) |
Current federal taxes |  | $ | (548) |  | $ | 3,632 |  | $ | 635 |
Current state taxes |  |  | 551 |  |  | 1,389 |  |  | 306 |
Deferred federal taxes |  |  | (159) |  |  | (2,539) |  |  | 431 |
Deferred state taxes |  |  | (29) |  |  | (351) |  |  | 190 |
|  | $ | (185) |  | $ | 2,131 |  | $ | 1,562 |
The provision for income taxes reconciles to the amounts computed by applying the statutory federal tax rate of 21% for fiscal years 2019 and 2018, and 34% for fiscal year 2017, to the Company’s income before income taxes. The sources and tax effects of the differences for fiscal years 2019, 2018 and 2017 are as follows:
|  | 2019 |  | 2018 |  | 2017 |
|  | (in thousands) |
Computed “expected” federal income tax expense |  | $ | 977 |  | $ | 2,554 |  | $ | 4,655 |
Permanent differences |  |  | 163 |  |  | 77 |  |  | (61) |
Nondeductible Executive Compensation |  |  | 688 |  |  | — |  |  | — |
Stock options and disqualifying dispositions |  |  | (731) |  |  | (354) |  |  | (1,629) |
Tax Act - federal rate change |  |  | — |  |  | — |  |  | (1,277) |
Energy efficient building deduction |  |  | (1,291) |  |  | (919) |  |  | — |
Current and deferred state income tax expense, net of federal benefit |  |  | 466 |  |  | 815 |  |  | 287 |
Change in valuation allowances on deferred tax assets |  |  | — |  |  | — |  |  | 15 |
Federal deferred tax adjustments |  |  | 231 |  |  | 220 |  |  | (441) |
Adjustment for uncertain tax positions |  |  | (282) |  |  | 61 |  |  | 363 |
Research and development tax credit |  |  | (510) |  |  | (313) |  |  | (188) |
Adjustment to prior earn-out liability |  |  | — |  |  | (198) |  |  | — |
Non-deductible transaction expenses |  |  | — |  |  | 203 |  |  | — |
Other |  |  | 27 |  |  | (15) |  |  | (162) |
True up income tax accounts |  |  | 77 |  |  | — |  |  | — |
|  | $ | (185) |  | $ | 2,131 |  | $ | 1,562 |
Differences between the Company’s effective income tax rate and what would be expected if the federal statutory rate was applied to income before income tax from continuing operations are primarily due to state income tax expense, research and development tax credits, energy efficient building deductions, stock options and disqualifying dispositions. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which, among other items, lowered the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. As a result of the Tax Act, the Company recorded a one-time decrease in deferred tax expense of $1.3 million for the fiscal quarter ended December 29, 2017 to account for the remeasurement of the Company’s deferred tax assets and liabilities on the enactment date. Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the application of generally accepted accounting principles in the United States of America, or GAAP, and directing taxpayers to consider the impact of the Tax Act as “provisional” when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for the change in tax law. In accordance with SAB 118, the Company recognized the provisional tax impacts during fiscal year 2017. As of December 28, 2018, the Company’s accounting for the Tax Act was complete. An adjustment of $0.2 million additional deferred tax expense was recorded due to the corporate tax rate change impact on adjustments to temporary differences that were estimated at the time of the tax provision and finalized for the tax return. The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and liabilities are as follows:
|  | December 27, |  | December 28,
|  | 2019 |  | 2018
|  | (in thousands)
Deferred tax assets: |  |  |  |  |  |
Accounts receivable allowance |  | $ | 315 |  | $ | 122
Other accrued liabilities |  |  | 2,124 |  |  | 2,714
Federal and state net operating losses |  |  | 18,717 |  |  | 20,569
Lease liability |  |  | 6,467 |  |  | —
Stock compensation |  |  | 3,381 |  |  | 2,167
Adjustments to fair value of assets |  |  | 79 |  |  | 733
Other |  |  | 622 |  |  | 173
|  |  | 31,705 |  |  | 26,478
Valuation allowance |  |  | (86) |  |  | (86)
Net deferred tax assets |  | $ | 31,619 |  | $ | 26,392
Deferred tax liabilities: |  |  |  |  |  |
Deferred revenue |  | $ | (5,031) |  | $ | (5,702)
Fixed assets |  |  | (618) |  |  | (116)
Intangible assets |  |  | (10,077) |  |  | (8,041)
Lease right-of-use assets |  |  | (6,127) |  |  | —
Other |  |  | (454) |  |  | (212)
|  |  | (22,307) |  |  | (14,071)
Net deferred tax asset |  | $ | 9,312 |  | $ | 12,321
At December 27, 2019, the Company had federal and state operating loss carryovers of $72.7 million and $58.0 million, respectively. The carryovers expire through 2039. During each fiscal year, management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. For fiscal years 2019 and 2018, the Company ultimately determined that it was more-likely-than-not that the entire California net operating loss will not be utilized prior to expiration. Significant pieces of objective evidence evaluated included the Company’s history of utilization of California net operating losses in prior years for each of the Company’s subsidiaries, as well as the Company’s forecasted amount of net operating loss utilization for certain members of the combined group. As of December 27, 2019 and December 28, 2018, the Company had a valuation allowance in the amount of $86,000, respectively, related to California net operating losses. During the fiscal year ending December 27, 2019, the Company decreased its recorded liability for uncertain tax positions to $142,000. This decrease resulted from the expiration of federal uncertain tax positions during fiscal year 2019. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2016 through 2019. The Company may also be subject to examination on certain state and local jurisdictions for the years 2015 through 2019. The Company's policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. Following is reconciliation of beginning and ending amounts of unrecognized tax benefits:
|  | Amount
|  | (in thousands)
Balance as of December 28, 2018 |  | $ | 424
Additions based on tax positions related to the current year |  |  | —
Additions for tax positions of prior years |  |  | 5
Reductions for tax positions related to the current year |  |  | —
Reductions for tax positions of prior years |  |  | (287)
Balance as of December 27, 2019 |  | $ | 142
During the year ended December 27, 2019, the Internal Revenue Service continued its audit of the Company’s tax return for the fiscal year ended December 30, 2016. The Company has not determined the impact of this examination due to the audit process having not been completed.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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