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

 

		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 - discrete items			284				342				626
Total income tax expense		$	1,692			$	708			$	2,400

 

		Fiscal Year Ended April 2, 2017
		Current				Deferred				Total
Income tax expense on current year income:
Federal		$	2,422			$	588			$	3,010
State			200				105				305
Foreign			10				-				10
Total income tax expense on current year income			2,632				693				3,325
Income tax expense (benefit) - discrete items:
Reserve for unrecognized tax benefits			134				-				134
Adjustment to prior year provision			9				4				13
Net excess tax benefit related to stock-based compensation			(248	)			-				(248	)
Income tax expense (benefit) - discrete items			(105	)			4				(101	)
Total income tax expense		$	2,527			$	697			$	3,224

 

		Fiscal Year Ended April 2, 2017
		Current				Deferred				Total
Federal		$	3,540			$	133			$	3,673
State			271				32				303
Other -- net, including foreign			(61	)			-				(61	)
Income tax expense			3,750				165				3,915
Income tax reported in shareholders' equity related to stock-based compensation			(273	)			-				(273	)
Total		$	3,477			$	165			$	3,642

 

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):

 

		April 1, 2018				April 2, 2017
Deferred tax assets:
Employee wage and benefit accruals		$	233			$	319
Accounts receivable and inventory reserves			180				301
Deferred rent			40				67
Intangible assets			391				590
State net operating loss carryforwards			724				829
Stock-based compensation			208				299
Total gross deferred tax assets			1,776				2,405
Less valuation allowance			(724	)			(829	)
Deferred tax assets after valuation allowance			1,052				1,576
Deferred tax liabilities:
Prepaid expenses			(186	)			(265	)
Property, plant and equipment			(334	)			(71	)
Total deferred tax liabilities			(520	)			(336	)
Net deferred income tax assets		$	532			$	1,240

 

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):

 

		2018				2017				2016
Balance at beginning of period		$	688			$	211			$	-
Additions related to current year positions			113				134				195
Additions related to prior year positions			96				343				16
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		$	1,017			$	688			$	211

 

During fiscal year an evaluation was made of the Company’s process regarding the calculation of the state portion of its income tax provision. This evaluation resulted in a tax position that reflects opportunities for the application of more favorable state apportionment percentages for several prior 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 being sought. Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording during fiscal years and reserves for unrecognized tax benefits of and respectively, in the accompanying consolidated financial statements. During fiscal year the Company recorded a gross reserve for unrecognized tax benefits of less an offset of to reflect state income tax overpayments net of the federal income tax impact, for a net reserve for unrecognized tax benefits of 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 benefits. This revaluation resulted in a net discrete charge to income tax expense of during fiscal year

 

The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax benefits 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 benefit 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 benefits 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):

 

		2018				2017				2016
Federal statutory rate			30.75	%			34.00	%			34.00	%
Tax expense at federal statutory rate		$	1,662			$	2,991			$	3,653
State income taxes, net of Federal income tax benefit			126				201				200
Tax credits			(12	)			(10	)			(13	)
Discrete items			626				(105	)			-
Net tax effect of book expenses not deductible for tax purposes			-				143				132
Other - net, including foreign			(2	)			4				(57	)
Income tax expense		$	2,400			$	3,224			$	3,915