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Note 15 - Income Taxes

12 Months Ended

Dec. 28, 2014

15. Income Taxes

A summary of the provision (benefit) for income taxes is as follows (in thousands):

	For the Fiscal Year Ended
	2014		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 (loss) before income taxes are summarized as follows:

	For the Fiscal Year Ended
	2014			2013			2012
Statutory federal tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income taxes		—			—			1.6
Change in valuation allowance		(34.9	)		(35.3	)		(373.8	)
Permanent tax differences		(0.1	)		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 28, 2014			December 29, 2013
Current deferred tax asset:
Accruals and reserves	$	674		$	448
Transaction costs		193			—
Valuation allowances		(867	)		(448	)
	$	—		$	—
Non-current deferred taxes:
Development costs	$	3,173		$	3,848
Deferred interest on notes receivable		—			1,121
Stock compensation expense		1,269			1,367
Amortization of intangible assets		48			58
Alternative minimum tax credit carryforward		919			919
Net operating loss carryforwards		40,684			30,594
Investment in unconsolidated investee		(1,530	)		(3,172	)
Other		(730	)		(699	)
Valuation allowances		(43,833	)		(34,036	)
	$	—		$	—

Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income and the impact of tax planning strategies. Management has evaluated all available evidence and has determined that negative evidence continues to outweigh positive evidence for the realization of deferred tax assets and as a result continues to provide a full valuation allowance against its deferred tax assets as of December 28, 2014.

As of December 28, 2014, Lakes had approximately $96.3 million of federal net operating loss carryforwards, which will begin to expire in 2032, and approximately $127.9 million of state net operating loss carryforwards, which will expire at various times depending on specific state laws.

The Company is currently under IRS audit for the 2009-2013 tax years and the IRS has proposed certain adjustments to the 2009-2011 tax filings. However, Lakes believes it is more likely than not that it will prevail in challenging the proposed adjustments and maintains that the positions taken were proper and supported by applicable laws and regulations. While the outcome of this matter cannot be predicted with certainty, Lakes does not believe, when resolved, that this dispute will have a material effect on its consolidated financial statements. However, an unexpected adverse resolution could have a material effect on the consolidated financial statements in a particular quarter or fiscal year.

The Company is currently under audit by the State of California for the 2010 tax year. No adjustments have been made as a result of the State of California audit. However, there is no assurance that the taxing authority 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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