NOTE 7: INCOME TAXES

The Company calculates its provision for federal and state income taxes based on current tax law. The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017 (“Enactment Date”) and has several key provisions impacting accounting for and reporting of income taxes. The most significant provision reduces the U.S. corporate statutory tax rate from 35% to 21% beginning on January 1, 2018. Although most provisions of tax reform are not effective until 2018, the Company is required to record the effect of a change in tax law as of the Enactment Date on its deferred tax assets. As the Company maintains a full valuation allowance against its deferred tax assets, there is no income tax expense recorded related to this change. As of the Enactment Date, the Company estimates that its deferred tax asset and related valuation allowance were each reduced by approximately $155.

Additionally, the Securities Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017, which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the Enactment Date. SAB 118 was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. Because the Company is still in the process of analyzing certain provisions of the Act, the Company has determined that the adjustment to its deferred taxes was a provisional amount as permitted under SAB 118.

The components of income tax benefit for the fiscal years ended December 30, 2017 and December 31, 2016 are as follows:

A reconciliation between the expected federal tax expense at the statutory tax rate of 34% and the Company’s actual tax expense for the fiscal years ended December 30, 2017 and December 31, 2016 follows:

Deferred tax assets for the fiscal years ended December 30, 2017 and December 31, 2016 consist of the following components:

At December 30, 2017, the Company has $487 of federal net operating loss carryforwards and $1,289 of state net operating loss carryforwards, which will begin to expire in 2033.

Management has concluded that based upon all available evidence it is more likely than not that deferred tax assets will not be utilized. The Company has recorded a decrease in the federal and state valuation allowances in the amount of $399 during the year ended December 30, 2017. The remaining deferred tax asset is offset by the federal unrecorded tax benefit.

The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

The following table indicates the changes to the Company’s uncertain tax positions for the fiscal years ended December 30, 2017 and December 31, 2016:

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes. The Company had approximately $21 and $2 of accrued interest and penalties related to uncertain tax positions at December 30, 2017 and December 31, 2016, respectively. The amount of uncertain tax positions that would affect the effective tax rate if they were recognized is $152. The liability at December 30, 2017 for uncertain tax positions is included in accrued expenses.