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Note 18. Income Taxes

12 Months Ended

Dec. 29, 2013

18. Income Taxes

The provision (benefit) for income taxes for fiscal 2013 and fiscal 2012 consist of the following (in thousands):

	For the Fiscal Year Ended
	2013		2012
Current:
Federal	$	—	$	(2,482	)
State	—			18
		—		(2,464	)
Deferred:
Federal		—		—
State		—		—
		—		—
Total:	$	—	$	(2,464	)

Reconciliations of the statutory federal income tax rate to the Company’s actual rate based on earnings before income taxes for fiscal 2013 and fiscal 2012 are summarized as follows:

	For the Fiscal Year Ended
	2013			2012
Statutory federal tax rate		35.0	%		35.0	%
State income taxes, net of federal income taxes		—			1.6
Change in valuation allowance		(35.3	)		(373.8	)
Permanent tax differences		0.3			5.5
Other, net		—			6.0
		—	%		(325.7	)%

The Company’s deferred income tax (liabilities) and assets are as follows (in thousands):

	December 29, 2013			December 30, 2012
Current deferred tax asset:
Accruals and reserves	$	448		$	273
Valuation allowances		(448	)		(273	)
	$	—		$	—
Non-current deferred taxes:
Development costs	$	3,848		$	3,863
Deferred interest on notes receivable		1,121			6,995
Unrealized losses on notes receivable		—			(9,360	)
Allowance for impaired notes receivable		—			7,082
Stock compensation expense		1,367			1,518
Amortization and impairment of intangible assets		58			8,646
Alternative minimum tax credit carryforward		919			919
Net operating loss carryforwards		30,594			23,008
Investment in unconsolidated investee		(3,172	)		(1,939	)
Other		(699	)		130
Valuation allowances		(34,036	)		(40,862	)
	$	—		$	—

As of December 29, 2013, Lakes has evaluated all available positive and negative evidence related to its ability to utilize its deferred tax assets. Lakes considered the non-recurring nature of current year book income, expected future book income (losses), lack of taxable loss carryback potential and other factors in reaching the conclusion that the deferred tax assets are not currently expected to be realized, and therefore the valuation allowance against the deferred tax assets continues to be appropriate as of December 29, 2013.

As of December 29, 2013, Lakes had approximately $72.3 million of federal net operating loss carryforwards, which will begin to expire in 2022, and approximately $96.5 million of state net operating loss carryforwards, which will expire at various times depending on specific state laws.

Lakes files a consolidated U.S. federal income tax return, as well as income tax returns in various states. The U.S. federal income tax returns for the years 2009 – 2012 and state income tax returns in various states for the years 2009 – 2012 remain subject to examination. The Company is currently under IRS audit for the 2009-2011 tax years and is under audit by the State of California for the 2010 tax year. No adjustments have been made as a result of these audits. However, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company’s expected outcome and that may impact the provision for income taxes.

- 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.

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