v3.6.0.2

INCOME TAXES | 12 Months Ended
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Jan. 01, 2017
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | (12) INCOME TAXES For financial reporting purposes, income before taxes includes the following components:
| Fiscal Year
(in thousands) | 2016 |  | 2015 |  | 2014
United States | $ | (5,264) |  | $ | 901 |  | $ | 2,764
Foreign |  | 322 |  |  | 226 |  |  | 223
Total | $ | (4,942) |  | $ | 1,127 |  | $ | 2,987
The following table summarizes the income tax (expense) benefit for the last three fiscal years:
| Fiscal Year
(in thousands) | 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |  |  |  |
Federal | $ | (629) |  | $ | (767) |  | $ | (1,264)
State |  | 112 |  |  | (45) |  |  | (263)
Foreign |  | (99) |  |  | (87) |  |  | (112)
|  | (616) |  |  | (899) |  |  | (1,639)
Deferred: |  |  |  |  |  |  |  |
Federal |  | 2,428 |  |  | 514 |  |  | 879
State |  | 188 |  |  | 337 |  |  | 28
|  | 2,616 |  |  | 851 |  |  | 907
Total income tax benefit (expense) | $ | 2,000 |  | $ | (48) |  | $ | (732)
The impact of uncertain tax positions taken or expected to be taken on income tax returns must be recognized in the financial statements at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefi ts for the years ended January 1, 2017, January 3, 2 016 and December 28, 2 014, respectively, is presented in the table below:
(in thousands) |  |
Balance at December 29, 2013 | $ | 45
| Increases attributable to tax positions taken during prior periods |  | 69
| Audit settlements |  | (19)
| Decreases due to lapses of statutes of limitations |  | (14)
Balance at December 28, 2014 |  | 81
| Decreases due to lapses of statutes of limitations |  | (34)
Balance at January 3, 2016 |  | 47
| Increases attributable to tax positions taken during prior periods |  | 142
| Audit settlements |  | (41)
| Decreases due to lapses of statutes of limitations |  | (33)
Balance at January 1, 2017 | $ | 115
At January 1, 2017, January 3, 2016 and December 28, 2014, there are $115,000, $47,000, and $81,000 of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal years 2016, 2015, and 2014, we recognized interest and penalties of $20,000, $(2,000), and $(7,000), respectivel y. Excluded from the above reconciliation were $25,000, $5,000 and $7,000, of accrued interest and penalties, net of tax benefit, for fiscal 2016, 2015, and 2014, respectively. The Company files income tax returns in the U.S. federal jurisdiction and va rious state j urisdictions. The preparation of these income tax returns requires the Company to interpret and apply relevant federal and state income tax laws. It is common for federal and state taxing authorities to periodically examine filed tax returns. During these examinations, it is possible for taxing authorities to interpret facts or tax law differently than the Company. As a result, the Company may be required to adjust tax liabilities affecting its effective tax rate. Tax years 2013 and forwar d remain subject to federal examination. Tax years 2012 and forward remain subject to state examination. It is possible that the liability associated with the unrecognized tax benefits will increase or decrease within the next 12 months. These changes may be the result of new audits or the expiration of statutes of limitations and could range up to $138,000 based on current estimates. Deferred taxes, detailed below, recognize the impact of temporary differences between the amounts of assets and liabili ties recorded for financial statement purposes and such amounts measured in accordance with tax laws. Realization of the net operating loss carry forwards and other deferred tax temporary differences are contingent on future taxable earnings. During fisca l years 2016 and 2015, our deferred tax asset was reviewed for expected utilization using a “more likely than not” approach as required by assessing the available positive and negative evidence surrounding its recoverability. At January 1, 2017, it is mor e likely than not that all deferred tax asset s attributable to temporary differences taken on federal and state tax returns will be realized bas ed on ou r consolidated taxable income for fiscal 2016 and fiscal 2015 as well as the expectation that reversing deferred tax assets will be offset by reversing deferred tax liabilities and certain tax planning strategies. However, there is a portion of deferred tax assets attributable to temporary differences taken on stand-alone state returns and stand-alone state net operating loss es and credit carry forward s that are unlikely to be realized due to insufficient future earnings. For these deferred tax assets, the Company has created a valuation allowance listed in the table below. The 2016 net change in valuation allowance is an increase to the valuation allowance in the amount of $531,000.
|  |  | January 1, |  | January 3,
(in thousands) |  | 2017 |  | 2016
Deferred tax asset: |  |  |  |  |
| Deferred rent |  | $ | 3,184 |  | $ | 3,379
| State net operating loss carry-forwards |  |  | 2,325 |  |  | 1,779
| Financing lease obligation |  |  | 1,028 |  |  | 1,170
| Tax credit carryover |  |  | 910 |  |  | 376
| Accrued expenses |  |  | 585 |  |  | 284
| Stock-based compensation |  |  | 472 |  |  | 344
| Deferred revenue |  |  | 452 |  |  | 476
| Lease reserve |  |  | 222 |  |  | 223
| Accrued and deferred compensation |  |  | 67 |  |  | 151
| Contribution carryover |  |  | 18 |  |  | ---
| Inventories |  |  | 9 |  |  | 10
Total deferred tax asset |  | $ | 9,272 |  | $ | 8,192
Deferred tax liability: |  |  |  |  |  |
| Property and equipment basis difference |  | $ | (1,671) |  | $ | (952)
| Inventories |  |  | (295) |  |  | (562)
| Prepaid expenses |  |  | (269) |  |  | (236)
| Intangible property basis difference |  |  | (56) |  |  | (134)
Total deferred tax liability |  | $ | (2,291) |  | $ | (1,884)
| Net deferred tax assets |  |  | 6,981 |  |  | 6,308
| Valuation allowance |  |  | (2,348) |  |  | (1,817)
| Total net deferred tax asset |  | $ | 4,633 |  | $ | 4,491
In 2016, we had cumulative net operating loss carry-forwards for tax reporting purposes of approximately $43.4 million for state purposes, which if not used, will begin to expire in fiscal 2018. We made federal income tax payments, net of federal refunds, of $210,000, $166,000, and $369,000 in 2016, 2015 and 2014, respectively. State and foreign income taxes paid by the Company, net of refunds, totaled $180,000, $232,000, and $231,000 in 2016, 2015 and 2014, respectively. Reconciliation between the statutory rate and the effective tax rate is as follows:
|  |  | Fiscal Year
|  |  | 2016 | 2015 | 2014
Federal statutory tax rate | 34.0 | % |  | 34.0 | % |  | 34.0 | %
State taxes, net of valuation allowance and federal benefit | 5.8 |  |  | 5.4 |  |  | 3.2 |
Foreign taxes | (2.0) |  |  | 7.7 |  |  | 3.7 |
Tax effect of permanent differences – meals and entertainment | (1.5) |  |  | 1.4 |  |  | 1.5 |
Tax effect of permanent differences – tip credit | (3.4) |  |  | 17.2 |  |  | 8.1 |
Tax effect of permanent differences – other | 0.3 |  |  | (0.6) |  |  | (1.4) |
Tax effect of general business credits | 8.9 |  |  | (50.7) |  |  | (23.8) |
Tax effect of foreign tax credit | 2.0 |  |  | (7.7) |  |  | (3.7) |
Uncertain tax positions | (2.7) |  |  | --- |  |  | --- |
Other | (0.9) |  |  | (2.4) |  |  | 2.9 |
Effective tax rate(1) | 40.5 | % |  | 4.3 | % |  | 24.5 | %
The decrease in the 2015 effective tax rate is primarily due to the small amount of 2015 pre-tax book income.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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