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Note 15 - Income Taxes | 12 Months Ended
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Dec. 29, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 15. INCOME TAXES Generally, the Company’s relative income or loss generated in each of its jurisdictions can materially impact the consolidated effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income, versus United States pretax income. The consolidated effective income tax rate for fiscal 2018 was 30.5% as compared to 920.4% for the comparable prior year period. Because of several unusual and large components, especially relative to the Company’s small consolidated pretax loss in dollars, the Company does not consider its fiscal 2017 effective tax rate of 920.4% to be meaningful in and of itself. The Company’s United States Federal statutory tax rate for the fifty-two weeks ended December 29, 2018 and the comparable prior year period, before any adjustments, was 21.0% and 34.0%, respectively. The income tax provisions reconciled to the tax computed at the United States Federal statutory rate for both fiscal 2018 and 2017 are as follows:
|  | December 29, 2018 |  |  | December 30, 2017 |
Federal statutory rate |  |  | 21.0 | % |  |  | 34.0 | %
Tax expense (benefit) on taxable (loss) income at federal statutory rate |  | $ | 821 |  |  | $ | (83 | )
State and Puerto Rico income taxes, net of Federal income tax benefit |  |  | 91 |  |  |  | (248 | )
United States 179D and Canadian R&D tax credits |  |  | (341 | ) |  |  | (603 | )
Permanent differences |  |  | 49 |  |  |  | 458 |
Worthless stock deduction |  |  | - |  |  |  | (2,861 | )
Foreign income tax rates |  |  | (173 | ) |  |  | (92 | )
Impact on net deferred tax assets from changes in federal tax rate in 2017 |  |  | - |  |  |  | 1,015 |
2018 adjustments to NOL and repatriation taxes |  |  | 730 |  |  |  | 198 |
Other |  |  | 16 |  |  |  | (39 | )
Total income tax (benefit) expense |  | $ | 1,193 |  |  | $ | (2,255 | )
The Company experienced several adjustments for the 2018 fiscal year that impacted its net income tax expense of $1.2 million, including 1 ) United States 179D deductions generated an income tax benefit of $0.3 million; 2 ) foreign income tax differences generated an income tax benefit of $0.2 million; and 3 ) changes to United States and Canadian net operating loss carryforward generated expense of $0.7 million, primarily from changes in 2018 as a result of new information upon completing the 2017 United States Federal tax return. The Company experienced several adjustments for the 2017 fiscal year that impacted its net income tax benefit of $2.3 million, including 1 ) United States 179D and Canadian research and development tax credits of $0.6 million; 2 ) several permanent differences generating income tax expense of $0.5 million; 3 ) a worthless stock deduction for a subsidiary purchased in fiscal 1996 that was closed in fiscal 2017 which generated an income tax benefit of $2.9 million; 4 ) foreign tax benefit, primarily from Canada, of $0.4 million; and 5 ) as a result of the federal tax rate change in fiscal 2018 to 21%, an increase to income tax expense of $1.0 million from a reduction in deferred tax assets, net of deferred tax liabilities and $0.2 million related to transition repatriation taxes. The components of income tax expense (benefit) are as follows:
|  | Fiscal Years Ended |
|  | December 29, 2018 |  |  | December 30, 2017 |
Current |  |  |  |  |  |  |  |
Federal |  | $ | (198 | ) |  | $ | (471 | )
State and local |  |  | 51 |  |  |  | 118 |
Foreign |  |  | (90 | ) |  |  | 237 |
|  |  | (237 | ) |  |  | (116 | )
Deferred |  |  |  |  |  |  |  |
Federal |  |  | 1,399 |  |  |  | (1,841 | )
State |  |  | 64 |  |  |  | (495 | )
Foreign |  |  | (33 | ) |  |  | 197 |
|  |  | 1,430 |  |  |  | (2,139 | )
Total |  | $ | 1,193 |  |  | $ | (2,255 | )
The Company completed its analysis of the Tax Cut and Jobs Act (“TCJA”) in fiscal 2018 and recorded a charge of $0.7 million due to the utilization of net operating loss carryforwards upon the filing of its 2017 federal income tax return. The Company recorded a tax benefit in fiscal 2017 in the amount of $2.9 million from a worthless stock deduction of one of the Company’s subsidiaries. The Company recorded a charge of $1.2 million in fiscal 2017 relating to the TCJA from the reduction in the value of its deferred tax assets due to the reduction in the federal tax rate and the Repatriation Tax. The components of earnings before income taxes by United States and foreign jurisdictions were as follows:
|  | Fiscal Years Ended |
|  | December 29, 2018 |  |  | December 30, 2017 |
United States |  | $ | 3,671 |  |  | $ | (1,660 | )
Foreign Jurisdictions |  |  | 237 |  |  |  | 1,415 |
|  | $ | 3,908 |  |  | $ | (245 | )
A reconciliation of the unrecognized tax benefits for the year December 29, 2018:
Unrecognized Tax Benefits |  |  |  |
Balance as of December 30, 2017 |  | $ | 628 |
Charges for current year tax positions |  |  | - |
Reserves for current year tax position |  |  | - |
Balance as of December 29, 2018 |  | $ | 628 |
The Company reached a verbal settlement with taxing authorities on its only uncertain tax position as of December 29, 2018 and anticipates that it will recognize a tax benefit of approximately $600 in the first quarter of fiscal 2019. The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to interest expense. The Company recorded no expense for penalties or interest in the fiscal years ended December 29, 2018 and December 30, 2017. At December 29, 2018 and December 30, 2017, deferred tax assets and liabilities consist of the following:
|  | December 29, 2018 |  |  | December 30, 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 388 |  |  | $ | 235 |
Federal and state net operating loss carryforward |  |  | 1,253 |  |  |  | 2,501 |
Reserves and accruals |  |  | 343 |  |  |  | 435 |
Other |  |  | 125 |  |  |  | 53 |
Total deferred tax assets |  |  | 2,109 |  |  |  | 3,224 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Acquisition amortization, net |  |  | (403 | ) |  |  | (206 | )
Prepaid expense deferral |  |  | (600 | ) |  |  | (503 | )
Bonus depreciation to be reversed |  |  | (381 | ) |  |  | (326 | )
Canada deferred tax liability, net |  |  | (398 | ) |  |  | (431 | )
Total deferred tax liabilities |  |  | (1,782 | ) |  |  | (1,466 | )
Total deferred tax asset, net |  | $ | 327 |  |  | $ | 1,758 |
The Company has gross net operating losses of $3.6 million, $7.9 million and $0.3 million to be applied to the net income of future Federal, State, and Canadian tax returns, respectively. The Federal and Canadian net operating losses will expire in 2037. The Company conducts business in many states. Net operating losses in these states expire at differing periods but the majority of these expire in 2037. The Company conducts its operations in multiple tax jurisdictions in the United States, Canada, Puerto Rico and Serbia. The Company and its subsidiaries file a consolidated United States Federal income tax return and file in various states. The Company’s federal income tax returns have been examined through 2010. The Internal Revenue Service is currently examining fiscal tax years 2011, 2012, 2013, 2015, 2016 and 2017. The State of New Jersey is currently examining fiscal tax years 2009 through 2012. Except for New Jersey and other limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2014. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2014. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2008.

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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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