What was the total amount of Benihana's deferred tax assets in 2022?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
------| | | 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% |
F-17
The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):
| Deferred tax assets: | 2022 | _ | 2021 | |
|---|---|---|---|---|
| Operating lease liabilities | $ | 18,871 | $ | 17,152 |
| Stock compensation | 415 | 247 | ||
| FICA tip credit carryforward | 13,976 | 9,929 | ||
| Net operating loss | 3,203 | 3,290 | ||
| Goodwill | 906 | 1,055 | ||
| Inventory | 20 | 10 | ||
| Charitable contributions carryforward | 3 | _ | ||
| Foreign tax credit carryforward | 622 | 382 | ||
| Deferred revenue | 190 | 165 | ||
| State and local tax credit carryforward | 135 | 310 | ||
| Expenses not deductible until paid | 298 | 1,667 |
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company's total deferred tax assets for the year 2022 amounted to $39,990. This figure represents the sum of various deferred tax assets, including those related to operating lease liabilities ($18,871), FICA tip credit carryforward ($13,976), net operating loss ($3,203), and other items such as goodwill, inventory, charitable contributions, foreign tax credit, deferred revenue, state and local tax credit, expenses not deductible until paid, IRC 163(j) disallowed interest carryforward, debt issuance costs, and Kona related acquisition costs.
Deferred tax assets arise from temporary differences between the book (accounting) value of assets and liabilities and their tax bases. These assets are expected to reduce taxable income in future years, resulting in tax savings. For a prospective Benihana franchisee, understanding these deferred tax assets is crucial as they reflect the company's financial strategies and potential future tax benefits.
The deferred tax assets are offset by deferred tax liabilities, which totaled $27,045 in 2022. These liabilities primarily stem from operating lease right-of-use assets and depreciation and amortization. The net deferred tax assets, after considering a valuation allowance of $622, amounted to $12,323 in 2022. This net figure is what appears on Benihana's balance sheet and represents the overall expected future tax benefit.
Franchisees should be aware that deferred tax assets are subject to change based on various factors, including changes in tax laws, the company's future profitability, and the accuracy of estimates used in calculating these assets and liabilities. It is advisable for potential franchisees to consult with a financial advisor to fully understand the implications of these deferred tax assets and liabilities on Benihana's financial health and future prospects.