What happens if Aplus's qualifying income does not exceed 90% of its total gross income?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
the tax accounting and financial accounting treatment of certain items, and due to allocation requirements related to taxable income under our Partnership Agreement. We do not have access to information regarding each partner's individual tax basis in our limited partner interests.
As a publicly traded limited partnership, we are subject to a statutory requirement that our "qualifying income" (as defined by the Internal Revenue Code, related Treasury Regulations and IRS pronouncements) exceed 90% of our total gross income, determined
on a calendar year basis.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Aplus is subject to a statutory requirement as a publicly traded limited partnership. Aplus's "qualifying income" (as defined by the Internal Revenue Code) must exceed 90% of its total gross income on a calendar year basis.
If Aplus's qualifying income does not meet this 90% threshold, the document states that Aplus would be taxed as a corporation for federal and state income tax purposes. This would significantly alter Aplus's tax obligations and potentially reduce the amount of income available for distribution to its partners/franchisees.
The FDD indicates that for the years 2021, 2022, and 2023, Aplus met the qualifying income requirement. This suggests that Aplus has historically been able to maintain the required level of qualifying income to avoid being taxed as a corporation.