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Note 5 - Income Taxes
 3 Months Ended
Jan. 20, 2012
Note 5 - Income Taxes Disclosure  
Note 5 - Income Taxes
Note 5 – Income Taxes:
 
 
The Company expects its effective tax rate for the 2012 fiscal year to be different from the federal statutory rate due to state taxes and a change in valuation allowance as follows:
 
Effective tax rate and benefit     %  
Federal statutory rate
     34.0    
State taxes
     5.2    
Change in valuation allowance
     -36.0    
Other
     -3.2    
Total effective tax rate and tax benefit
     0.0    
 
We recorded a provision for income taxes in the amount of zero for the twelve week period ended January 20, 2012, related to federal and state taxes, based on the Company’s expected annual effective tax rate.  On December 17, 2010, during the Company’s first quarter of fiscal 2011, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law and extended bonus depreciation on purchases of qualified business property through December 2011.  Management elected to take bonus depreciation for fiscal year 2010 which reduced its estimated tax liability. Management estimates incurring a taxable loss for fiscal year 2011, which is partly due to electing bonus depreciation for fiscal year 2011, which can be carried back to allow the recovery of excess income taxes paid during fiscal 2010.
 
Management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing taxable temporary differences.  Management reevaluated the need for a full valuation allowance at January 20, 2012 based on both positive and negative evidence.  The weight of negative factors and level of economic uncertainty in our current business continued to support the conclusion that the realization of its deferred tax assets does not meet the more likely than not standard.  As a result of this evaluation, a full valuation allowance remained against the net deferred tax assets as of January 20, 2012. Management will continue to periodically reevaluate the valuation allowance and, to the extent that conditions change, some or all of such valuation allowance could be reversed in future periods.  The Company has established objective criteria that must be met before a release of the valuation allowance will occur.
 
Our federal income tax returns are open to audit under the statute of limitations for the fiscal years ended October 31, 2008 through October 29, 2010.  We are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to audit under the statute of limitations for the fiscal years ended November 2, 2007 through October 29, 2010.