How does Beggars Pizza recognize each member's share of the Illinois Pass-Through Entity Tax?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
| | Initial franchise fees | | | | |
1. Summary of Significant Accounting Policies (cont'd)
Income Taxes – The Company elected to pay Illinois Pass-Through Entity ("PTE") Tax ("PTE Tax") on behalf of the members. This tax is assessed as 4.95% of our business income and is applied to reduce each member's proportionate share of federal taxable income reportable on that member's personal income tax return. Accordingly, each member recognizes a federal income tax benefit as if the member's state income tax were fully deductible on the member's personal federal income tax return. Since the income tax benefits associated with the PTE Tax exclusively benefit the members, each member's proportionate share of the tax is recognized as a distribution to that member. Each of the member's distributions include $30,856 and $39,863 representing t
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the company has elected to pay the Illinois Pass-Through Entity Tax (PTE Tax) on behalf of its members. This tax is calculated as 4.95% of the business income and is used to lower each member's share of federal taxable income, which is reported on their personal income tax return. This arrangement allows each member to recognize a federal income tax benefit, as if their state income tax were fully deductible on their federal income tax return.
Because the income tax benefits from the PTE Tax are exclusively for the members, Beggars Pizza recognizes each member's proportionate share of the tax as a distribution to that member. For the years ending December 31, 2024 and 2023, each member's distributions included $30,856 and $39,863, respectively, representing their share of the PTE Tax paid on their behalf.
For a prospective franchisee, this means that Beggars Pizza's payment of the Illinois PTE Tax on their behalf will be treated as a distribution to them, and they will receive a corresponding federal income tax benefit. The amounts of these distributions were $30,856 and $39,863 for the years 2024 and 2023, respectively. This arrangement could be financially beneficial for franchisees, as it effectively reduces their overall tax burden.