Entity information:
15.
  INCOME TAXES
 
On
December 22, 2017,
the SEC issued guidance under Staff Accounting Bulletin
No.
118,
Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB
118”
) directing taxpayers to consider the impact of the Tax Act as “provisional” when it does
not
have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The changes in the Tax Act are broad and complex. The final impacts of the Tax Act
may
differ from the Company
’s estimates due to, among other things, changes in interpretations of the Tax Act, further legislation related to the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the impacts of the Tax Act. The SEC has issued rules that would allow for a measurement period of up to
one
year after the enactment date of the Tax Act to finalize the related tax impacts. The Company currently anticipates finalizing any resulting adjustments by the end of our next fiscal year ending
December 29, 2018.
The Company, based on current knowledge, did estimate the impact of SAB
118
on its income tax provision for the
fifty-two
week period ended
December 30, 2017.
The total impact was an increase to its current year tax expense of
$1.2
million, including
$1.0
million for a reduction in deferred tax benefit and
$0.2
million related to transition repatriation taxes.
 
Generally, the Company
’s relative income or loss generated in each of its jurisdictions can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income, versus U.S. pretax income. Current Canadian tax rates are approximately
26.5%
and current Serbian tax rates are typically between
15.0%
and
20.0%.
The consolidated effective income tax rate for fiscal
2017
was
920.4%
as compared to
46.8%
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. In order to provide context for the consolidated effective income tax rate of the fiscal
2017,
the material components of the fiscal
2017
tax provision, as delineated below, must be considered. The income tax provisions reconciled to the tax computed at the statutory Federal rate are as follows:
 
   
December 3
0,
201
7
    
December 31,
2016
  
Tax
(benefit) expense on taxable (loss)
income
at statutory rate of 34.0%
   $
(83
)
   $
1,123
  
State and Puerto Rico income taxes, net of Federal income tax benefit
    
(248
)
    
263
  
U
SA 179D and Canadian R&D tax credits
    
(603
)
    
-
  
Permanent differences
    
458
      
186
  
Worthless stock deduction
    
(2,861
)
    
-
  
Foreign income tax rate
s
    
(92
)
    
17
  
Impact on net deferred tax assets from 2018 Federal tax rate change
    
1,015
      
-
  
Transition repatriation taxes
    
198
      
-
  
Other
    
(39
)
    
(45
)
Total income tax
(benefit) expense
   $
(2,255
)
   $
1,544
  
 
The Company
’s statutory federal tax rate for the
fifty-two
weeks ended
December 30, 2017
was
34.0%.
The Company experienced several material events for the
fifty-two
week period that impacted its net income tax benefit of
$2.3
million, including
1
) state and Puerto Rico income tax benefit of
$248;
2
) a USA
179D
and Canadian research and development tax credits of
$603;
3
) several permanent differences generating income tax expense of
$458;
4
) 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;
5
) foreign tax benefit, primarily from Canada, of
$369;
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 Company’s fiscal
2016
effective tax rate of
46.8%
was unusually high due to the following reasons:
1
) a small pretax loss in the Company’s Canadian operations; and
2
) normal permanent differences and fixed tax rates in Puerto Rico as both items were spread over a low base of pretax income in the United States.
 
The components of income tax expense (benefit) are as follows:
 
   
Fiscal Years Ended
  
   
December 30
,
201
7
    
December 31
,
2016
  
Current
                
Federal
   $
(471
)
   $
688
  
State and local
    
118
      
402
  
Foreign
    
237
      
(3
)
                 
     
(116
)
    
1,087
  
Deferred
                
Federal
    
(1,841
)
    
372
  
State
    
(495
)
    
108
  
Foreign
    
197
      
(23
)
                 
     
(2,139
)
    
457
  
                 
Total
   $
(2,255
)
   $
1,544
  
 
The components of earnings before income taxes by United States and foreign jurisdictions were as follows:
 
   
Fiscal Years Ended
  
   
December 30
,
201
7
    
December 31
,
2016
  
United States
   $
(1,660
)
   $
3,430
  
Foreign Jurisdictions
    
1,415
      
(128
)
                 
    $
(245
)
   $
3,302
  
 
A reconciliation of the unrecognized tax benefits for the year
December 30, 2017:
 
Unrecognized Tax Benefits
  
         
Balance as of
December 31, 2016
   $
628
  
Charges for current year tax positions
    
-
  
Reserves for current year tax position
    
-
  
         
Balance as of
December 30, 2017
   $
628
  
 
The total amount of unrecognized tax benefits relating to the Company
’s tax positions is subject to change based on future events including, but
not
limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will
not
change during the next
12
 months. However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to change materially in the future.
 
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 30, 2017
and
December 31, 2016.
 
At
December 30, 2017
and
December 31, 2016,
deferred tax assets and liabilities consist of the following:
 
   
December 3
0,
201
7
    
December 31,
2016
  
Deferred tax assets:
                
Allowance for doubtful accounts
   $
235
     $
451
  
Federal and state net operating loss carryforward
    
2,501
      
-
  
Reserves and accruals
    
435
      
394
  
Other
    
53
      
323
  
Total deferred tax assets
    
3,224
      
1,168
  
                 
Deferred tax liabilities:
                
Acquisition amortization, net
    
(206
)
    
(100
)
Prepaid expense deferral
    
(503
)
    
(750
)
Bonus depreciation to be reversed
    
(326
)
    
(466
)
Canada deferred tax liability, net
    
(431
)
    
(234
)
Total deferred tax liabilities
    
(1,466
)
    
(1,550
)
Total deferred tax (liability) asset, net
   $
1,758
     $
(382
)
 
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 U.S. 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
and
2015.
  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
2012.
  The Company is
no
longer subject to audit in Canada for the tax years prior to tax year
2013.
  The Company is
no
longer subject to audit in Puerto Rico for the tax years prior to tax year
2007.