What was the effective income tax rate for Benihana in 2022?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
| For the years ended December 31, | ||
|---|---|---|
| 2022 | 2021 | |
| Income tax provision at federal statutory rate | 21.0% | 21.0% |
| State and local taxes | 7.6% | 4.5% |
| FICA tip credit | (22.5)% | (7.2)% |
| Compensation subject to IRC Section 162(m) | 8.6% | 6.2% |
| Equity based compensation | (9.3)% | (7.6)% |
| PPP income exclusion | —% | (11.6)% |
| Other items, net | 0.8% | (0.6)% |
| Effective income tax rate | 6.2% | 4.7% |
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the effective income tax rate for the year ended December 31, 2022, was 6.2%. This rate is the actual percentage of income that Benihana paid in income taxes after taking into account various deductions and credits.
The document also provides a breakdown of factors contributing to this effective tax rate. These include the income tax provision at the federal statutory rate of 21.0%, state and local taxes accounting for 7.6%, and a FICA tip credit of (22.5)%. Additionally, compensation subject to IRC Section 162(m) contributed 8.6%, equity-based compensation had a (9.3)% impact, and other items, net, accounted for 0.8%.
It's important to note that the effective tax rate can differ significantly from the statutory U.S. tax rate of 21% due to various factors such as tax credits for FICA taxes on employees' tips, taxes owed in foreign and local jurisdictions, and windfall tax benefits from equity compensation, offset by compensation limits for certain high-earning individuals. Understanding these components can help potential franchisees appreciate the complexities of Benihana's tax obligations and how they impact the company's overall financial performance.