What items does the management of Benjamin Franklin Plumbing rely on to estimate future taxable income?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | |
|---|---|---|
| Deferred tax assets | ||
| Net operating losses and credits | $ 23,175 | $ 20,645 |
| Deferred revenue | 9,709 | 8,684 |
| Interest limitation | 21,036 | 14,396 |
| Lease obligation liability | 3,199 | 3,353 |
| Operating lease liabilities | 3,554 | 4,029 |
| Capitalized R&D | 5,620 | 7,212 |
| Accrued expenses | 1,458 | 512 |
| Allowance for doubtful accounts | 2,673 | 1,423 |
| Gross deferred tax asset | 70,424 | 60,254 |
| Valuation allowance | (12,023) | - |
| Total deferred tax assets | 58,401 | 60,254 |
| Deferred tax liabilities | ||
| Intangibles | (38,368) | (43,449) |
| Goodwill | (16,740) | (19,409) |
| Operating lease right-of-use asset | (3,291) | (3,778) |
| Property and equipment | (5,553) | (11,345) |
| Other | (26) | (39) |
| Gross deferred tax liability | (63,978) | (78,020) |
| Total deferred tax liability | $ (5,577) | $ (17,766) |
As of December 31, 2024 and 2023, the Company has net operating loss ("NOL") carryforwards for U.S. federal tax purposes of $94,644 and $82,561, respectively. The federal NOL carryforwards have no expiration. As of December 31, 2024 and 2023, the Company has NOL carryforwards of approximately $75,084 and $62,769, respectively, for state income tax purposes. The state NOL carryforwards expire at various dates through 2044. As of December 31, 2024 and 2023, the Company has cumulative interest limitation carryforwards for U.S. federal tax purposes of $86,363 and $57,700, respectively.
The Company assesses all available positive and negat
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to the 2025 FDD, Benjamin Franklin Plumbing assesses available evidence to estimate future taxable income to permit the use of existing deferred tax assets. Management relies on several factors, ordered from least to most subjective, including cumulative historical earnings, reversing taxable temporary differences, forecasted earnings, and tax planning strategies.
As of December 31, 2024, a valuation allowance of $12,023 was established for federal and state net operating loss (NOL) and interest limitation carryforward amounts. This allowance reflects an assessment of the realizability of deferred tax assets based on estimates of future taxable income during the carryforward period. However, the realizable amount of deferred tax assets could be adjusted if estimates of future taxable income increase or if sufficient objective positive evidence, such as cumulative income, becomes available.
For a prospective Benjamin Franklin Plumbing franchisee, understanding how the company estimates future taxable income and manages deferred tax assets is crucial. It provides insight into the financial strategies and risk assessments employed by the company. Franchisees should be aware that these estimates and allowances can impact the overall financial health and tax obligations of the franchise.