|12 Months Ended|
Dec. 28, 2019
Note 7 – Income Taxes
The components of income (loss) from continuing operations before income tax provision consist of the following:
Income tax (benefit) provision for fiscal year 2019 and 2018 consists of the following:
Income tax (benefit) provision differs from the amount that would result from applying the federal statutory rate as follows:
For fiscal years 2019 and 2018 the effective tax rate for the Company was (212.0)% and 6.3%, respectively. The Company’s effective tax rate for fiscal years 2019 differs from the U.S. federal rate primarily as a result of non-deductible share-based compensation, the write-off of expired state net operating loss carryforwards, and the change in the valuation allowance maintained against the Company’s deferred tax assets.
Deferred tax assets and deferred tax liabilities consisted of the following:
At December 28, 2019, federal and state net operating loss (“NOL”) carryforwards were $85,830 and $79,644, respectively. Federal NOL carryforwards of $2,106 were acquired in the acquisition of WAG which are subject to Internal Revenue Code section 382 and limited to an annual usage limitation of $135. Federal NOL carryforwards begin to expire in 2029. The state NOL carryforwards expire in the respective tax years as follows:
Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversal of existing taxable temporary differences. ASC 740 provides that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years or losses expected in early future years. As of December 28, 2019, in part because in the year then ended the Company reached three years of cumulative pre-tax loss in the U.S federal tax jurisdiction, management considered it appropriate to record additional valuation allowance of approximately $23,015 against our deferred tax assets. As of December 28, 2019 the Company maintained a valuation allowance in the amount of $29,731 against deferred tax assets that were not more likely than not of being realized.
We are subject to U.S. federal income tax as well as income tax of foreign and state tax jurisdictions. The tax years 2015‑2019 remain open to examination by the major taxing jurisdictions to which the Company is subject, except the Internal Revenue Service for which the tax years 2016‑2019 remain open. The Company does not anticipate a significant change to the amount of unrecognized tax benefits within the next twelve months.
Included in accrued expenses are income taxes payable of $33 and $23 for the fiscal year 2019 and 2018 respectively, consisting primarily of current foreign taxes. Included in other non-current liabilities are income taxes payable of $662 and $614 for the fiscal year 2019 and 2018, respectively, relating to future foreign withholding taxes.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef