Is Batteries Plus Bulbs subject to a tax sharing agreement?
Batteries_Plus_Bulbs Franchise · 2025 FDDAnswer from 2025 FDD Document
ieves the Company is not exposed to any significant credit risk on cash.
Income Taxes
No provision for federal income taxes is recorded in the consolidated financial statements since the Company is treated as a disregarded entity for federal income tax purposes. Accordingly, the Company's taxable income is reported on the income tax return of Holdings and the two companies are not subject to
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 2023 and 2022 (in thousands)
a tax sharing agreement. In addition, the Company is subject to various income taxes and surcharges in states with franchised stores, and in China and Hong Kong with respect to its wholly owned subsidiaries, whose tax expense and attributes are not material.
As required by the uncertain tax position guidance, Holdings recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Holdings has applied the uncertain tax position guidance to all tax positions for which the statute of limitations remained open.
Holdings' federal income tax returns are subject to examination generally for three years after they are filed and its state income tax returns generally for four years after they are filed. In 2022, the IRS notified the Company that it was initiating an Employment Review of the Company's 2019 related filings. The results of this review would be extended to in
Source: Item 21 — Financial Statements (FDD pages 79–80)
What This Means (2025 FDD)
According to Batteries Plus Bulbs's 2025 Franchise Disclosure Document, the company is not subject to a tax sharing agreement. However, Batteries Plus Bulbs is subject to various income taxes and surcharges in states with franchised stores, as well as in China and Hong Kong, where it has wholly-owned subsidiaries. The tax expenses and attributes of these subsidiaries are not considered material.
The FDD also addresses how Batteries Plus Bulbs handles uncertain tax positions. The company only recognizes the financial statement benefit of a tax position after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting this threshold, the amount recognized is the largest benefit with a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.
The document further notes that Holdings' federal income tax returns are generally subject to examination for three years after filing, and state income tax returns for four years. In 2022, the IRS initiated an Employment Review of the company's 2019 filings, which was later extended to include 2020 and 2021. This review concluded in January 2023, resulting in the company paying $88 to the US Treasury. For the years ended December 31, 2023 and 2022, Holdings reported no interest and penalties related to income taxes.