Note 13. Income Taxes

 

A reconciliation of the difference between the provision for income taxes computed at statutory rates and the provision for income taxes provided in the consolidated statements of income is as follows:

 

 

The provision for income taxes was comprised of the following:

 

 

Total net deferred tax assets as of March 26, 2017 and March 27, 2016, and the sources of the differences between financial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets and liabilities, are as follows:

 

 

The Company has reviewed its deferred tax assets realization and has determined that no valuation allowance is required as of March 26, 2017 or March 27, 2016.

 

As of March 26, 2017, the Company had gross unrecognized tax benefit of $204,500 ($147,800 net of federal benefit). As of March 27, 2016, the Company had gross unrecognized tax benefits of $290,400 ($188,800 net of federal benefit).

 

The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as income taxes. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2017 was a benefit of $10,000 (net of federal expense) and the cumulative amount included as a liability in the consolidated balance sheet as of March 26, 2017 was $314,296 (net of federal benefit). The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2016 was an expense of $16,600 (net of federal benefit) and the cumulative amount included in the consolidated balance sheet as of March 27, 2016 was $399,800 (net of federal benefit). The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2015 was a benefit of $31,600 (net of federal expense). 

 

As of March 26, 2017, the total net amount of unrecognized tax benefits, inclusive of indirect tax benefits and deferred tax benefits was $147,800 and associated penalties and interest were $314,300. The net amount of $462,100, if recognized, would affect the effective tax rate.

 

A reconciliation of the changes in the gross balance of unrecognized tax benefit amounts, net of interest, is as follows:

 

 

The Company files income tax returns in U.S. federal, state and local jurisdictions. Certain income tax returns for fiscal years 2012 through 2016 remain open to examination by U.S. federal, state and local tax authorities. No federal, state and local income tax returns are currently under examination.