What are the potential tax implications related to 1 800 Packouts' 'Goodwill, net'?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
| (262,480) | ||
|---|---|---|
| Federal | $ | |
| State | 244 | (78,963) |
| Total current | (132,939) | (341,443) |
| Federal | 453,482 | (292,567) | |--------------------------------------------|---------------------|-----------| | State | 111,856 | (131,688) | | Total deferred | 565,338 | (424,255) | | Total benefit (provision) for income taxes | $ 432,399 $ | (765,698) | Significant components of the Company's deferred income tax assets (liabilities) are as follows as of December 31:
| 2024 | ||
|---|---|---|
| $ | (5,284,048) | (5,747,861) |
| $ | ||
| (153,662) | (16,114) | |
| (36,969) | (44,540) | |
| 249,196 | 140,945 | |
| 287,562 | 166,613 | |
| (4,146) | (6,448) | |
| $ | (4,942,067) | (5 |
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 FDD, 1 800 Packouts addresses potential tax implications related to goodwill. The document states that the benefit (or provision) for income taxes may differ from what would be expected by applying the federal statutory income tax rate to income (or loss) before income taxes. This difference can arise due to factors such as tax rate adjustments, state taxes, permanent differences in deductible goodwill amortization, and adjustments from prior periods.
For a prospective 1 800 Packouts franchisee, this means that the company's income tax calculations can be complex and influenced by several factors, including how goodwill is treated for tax purposes. Goodwill typically arises when a company acquires another business, and it represents the intangible assets that are not separately identifiable. The FDD indicates that 1 800 Packouts amortizes goodwill over a period of ten years.
The FDD also mentions that as of December 31, 2024, the company had U.S. federal and state tax-basis net operating loss carryforwards (NOLs) of approximately $1,182,000 and $1,045,000, respectively. These NOLs will begin to expire in 2038 and 2036, respectively. Furthermore, 1 800 Packouts states it has determined that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits. Prospective franchisees should be aware of these factors, though the tax implications are primarily relevant to the parent company, FS PEP Holdco, LLC, and not directly to the franchisees themselves. However, understanding the financial health and tax strategies of the parent company can provide valuable insight into the overall stability and management of the 1 800 Packouts franchise system.