What was the balance of the Tax Valuation Allowance at the end of the period for Budget as of December 31, 2023?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
| (in millions) Description | Balance of | at Beginning Period | Expe | nse (Benefit) | Other Adjustments (a) | _ | Deductions | Balance at End of Period |
|---|---|---|---|---|---|---|---|---|
| Tax Valuation Allowance: Year Ended December 31, 2024 2023 2022 | $ | 106 103 169 | $ | (6) (2) (63) | (15) 5 (3) | $ | - | $ 85 106 103 |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the balance of the Tax Valuation Allowance at the end of the period for December 31, 2023, was $106 million. This figure represents Budget's assessment of the portion of its deferred tax assets that may not be realized in the future.
A tax valuation allowance is a contra-asset account used to reduce the carrying value of deferred tax assets (DTAs) when it is more likely than not that some or all of the DTAs will not be realized. DTAs arise when a company has deductible temporary differences or carryforwards that will reduce taxable income in future years. However, if a company believes it may not generate sufficient future taxable income to utilize these DTAs, it must establish a valuation allowance to reflect the uncertainty.
For a prospective Budget franchisee, this information provides insight into Budget's financial health and its expectations regarding future profitability. A significant valuation allowance could indicate that Budget has experienced losses or anticipates challenges in generating future taxable income. While not directly impacting the franchisee's day-to-day operations, it's a factor to consider when evaluating the overall stability and performance of the franchise system.
It is important to note that the valuation allowance is an accounting estimate and is subject to change based on Budget's future performance and changes in tax laws. Franchisees should consult with financial advisors to understand the implications of Budget's financial statements and tax position.