What was the income tax provision at the federal statutory 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 income tax provision at the federal statutory rate for the year 2022 was 21.0%. This figure represents the standard federal income tax rate applied to Benihana's earnings before considering any adjustments or credits.
It's important to note that the effective income tax rate, which reflects the actual tax rate Benihana paid after various adjustments, was 6.2% for 2022. The difference between the statutory rate and the effective rate is due to factors such as state and local taxes, FICA tip credits, compensation subject to IRC Section 162(m), equity-based compensation, and other items. These adjustments can significantly impact the overall tax burden for Benihana.
A prospective franchisee should understand the difference between the statutory and effective tax rates, as this can provide insight into how Benihana manages its tax obligations. While the statutory rate provides a baseline, the effective rate offers a more accurate picture of the company's actual tax expenses. Franchisees may want to inquire about the specific strategies Benihana employs to optimize its tax position and how these strategies might affect their own financial performance.