The Company’s income tax provision for the fiscal years ended and is summarized below (in thousands):

 

		Fiscal year ended March 31, 2019
		Current				Deferred				Total
Income tax expense on current year income:
Federal		$	1,282			$	61			$	1,343
State			287				18				305
Foreign			11				-				11
Total income tax expense on current year income			1,580				79				1,659
Income tax expense (benefit) - discrete items:
Reserve for unrecognized tax benefits			87				-				87
Adjustment to prior year provision			85				(71	)			14
Net excess tax shortfall related to stock-based compensation			12				-				12
Income tax expense (benefit) - discrete items			184				(71	)			113
Total income tax expense		$	1,764			$	8			$	1,772

 

		Fiscal year ended April 1, 2018
		Current				Deferred				Total
Income tax expense on current year income:
Federal		$	1,219			$	325			$	1,544
State			177				41				218
Foreign			12				-				12
Total income tax expense on current year income			1,408				366				1,774
Income tax expense (benefit) - discrete items:
Reserve for unrecognized tax benefits			113				-				113
Revaluations due to change in enacted tax rates			120				377				497
Adjustment to prior year provision			74				(35	)			39
Net excess tax benefit related to stock-based compensation			(23	)			-				(23	)
Income tax expense (benefit) - discrete items			284				342				626
Total income tax expense		$	1,692			$	708			$	2,400

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of and are as follows (in thousands):

 

		March 31, 2019				April 1, 2018
Deferred tax assets:
Employee wage and benefit accruals		$	441			$	197
Accounts receivable and inventory reserves			129				180
Deferred rent			25				40
Intangible assets			184				391
State net operating loss carryforwards			710				724
Accrued interest and penalty on unrecognized tax liabilities			55				36
Stock-based compensation			148				208
Total gross deferred tax assets			1,692				1,776
Less valuation allowance			(710	)			(724	)
Deferred tax assets after valuation allowance			982				1,052
Deferred tax liabilities:
Prepaid expenses			(175	)			(186	)
Property, plant and equipment			(283	)			(334	)
Total deferred tax liabilities			(458	)			(520	)
Net deferred income tax assets		$	524			$	532

 

In assessing the probability that the Company’s deferred tax assets will be realized, management of the Company has considered whether it is more likely than that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the future periods in which the temporary differences giving rise to the deferred tax assets will become deductible. The Company has also considered the scheduled inclusion into taxable income in future periods of the temporary differences giving rise to the Company’s deferred tax liabilities. The valuation allowance as of and was related to state net operating loss carryforwards that the Company does expect to be realized. Based upon the Company’s expectations of the generation of sufficient taxable income during future periods, the Company believes that it is more likely than that the Company will realize its deferred tax assets, net of the valuation allowance and the deferred tax liabilities.

 

The Company’s policy is to recognize the effect that a change in enacted tax rates would have on net deferred income tax assets and liabilities in the period in which the tax rates are changed. On the President of the United States signed into law the TCJA, which includes a provision to lower the federal corporate income tax rate to effective as of As the Company’s fiscal year ended on the lower corporate income tax rate was phased in, resulting in a blended federal statutory rate of for fiscal year

 

The Company’s policy is to provide for deferred income taxes based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse. The Company has recognized the effect of the TCJA on the Company’s net deferred income tax assets, which as of and had been recorded based upon the pre-TCJA enacted composite federal, state and foreign income tax rate of approximately that would have been applied as the financial statement and tax differences began to reverse. Because most of these differences are now estimated to reverse at a composite rate of approximately the Company was required to revalue its net deferred income tax assets. This revaluation resulted in a discrete charge to income tax expense of during fiscal year

 

Management evaluates items of income, deductions and credits reported on the Company’s various federal and state income tax returns filed and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than to be sustained. The Company applies the provisions of FASB ASC Sub-topic -- which requires a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements. Recognized income tax positions are measured at the largest amount that has a greater than likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

 

The following table sets forth the reconciliation of the beginning and ending amounts of unrecognized tax benefits for fiscal years and (in thousands):

 

		2019				2018
Balance at beginning of period		$	1,017			$	688
Additions related to current year positions			87				113
Additions related to prior year positions			90				96
Revaluations due to change in enacted tax rates			-				120
Reductions for tax positions of prior years			-				-
Reductions due to the lapse of the statute of limitations			-				-
Payments pursuant to judgements and settlements			-				-
Balance at end of period		$	1,194			$	1,017

 

In evaluating the process regarding the calculation of the state portion of its income tax provision, the Company has taken a tax position that reflects opportunities for more favorable state apportionment percentages, which were applied to several prior fiscal years and to succeeding fiscal years. After considering all relevant information, the Company believes that the technical merits of this tax position would more likely than be sustained. However, the Company also believes that the ultimate resolution of the tax position will result in a tax benefit that is less than the full amount realized through the application of the more favorable state apportionment percentages. Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording discrete reserves for unrecognized tax liabilities during fiscal years and of and respectively. Because the tax impact of the revised state apportionment percentages are measured net of federal income taxes, the provision in the TCJA that lowered the federal corporate income tax rate to required the Company to revalue its reserve for unrecognized tax liabilities. This revaluation resulted in a net discrete charge to income tax expense of during fiscal

 

The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax liabilities as a charge to interest expense in the Company’s consolidated statements of income. During fiscal years and the Company accrued and respectively, for interest expense and penalties on the portion of the unrecognized tax liabilities that has been refunded to the Company but for which the relevant statute of limitations remained unexpired. interest expense or penalties are accrued with respect to estimated unrecognized tax liabilities that are associated with state income tax overpayments that remain receivable.

 

The Company's provision for income taxes is based upon effective tax rates of and in fiscal years and respectively. These effective tax rates are the sum of the top U.S. statutory federal income tax rate and a composite rate for state income taxes, net of federal tax benefit, in the various states in which the Company operates, plus the net effect of various discrete items.

 

The following table reconciles income tax expense on income from continuing operations at the U.S. federal income tax statutory rate to the net income tax provision reported for fiscal years and (in thousands):

 

		2019				2018
Federal statutory rate			21.00	%			30.75	%
Tax expense at federal statutory rate		$	1,426			$	1,662
State income taxes, net of Federal income tax benefit			241				126
Tax credits			(11	)			(12	)
Discrete items			113				626
Other - net, including foreign			3				(2	)
Income tax expense		$	1,772			$	2,400