Does Burros Fries believe the income tax positions taken were appropriate?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company has taken tax positions in the current and prior years with respect to various transactions entered into the ordinary course of business that management believes are appropriate in the circumstances.
In the event of an audit by federal or state taxing authorities, these positions could be challenged by tax authorities. Any related adjustments to the Company's taxable income would be taxable at statutory rates and subject to utilization of net operating loss carryforwards. Management believes that tax positions it has taken would be sustained in the event of an audit and that any resultant tax would be immaterial to the financial statements of the Company taken as a whole. No tax years are currently under audit. Tax years 2020 through 2022 are currently open for examination by taxing authorities. The Company's policy regarding any interest and penalties associated with its tax position is to recognize amounts separately as interest and penalties expense, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries' 2024 Franchise Disclosure Document, the company's management believes that the income tax positions taken in prior and current years are appropriate. This means Burros Fries believes it has correctly applied tax laws and regulations to its business transactions. However, the FDD also acknowledges that these positions could be challenged if the company is audited by federal or state taxing authorities.
If such a challenge occurs, any adjustments to Burros Fries' taxable income would be subject to statutory tax rates and the utilization of net operating loss carryforwards. Despite this possibility, Burros Fries management maintains its belief that the tax positions taken would be upheld in an audit. They also believe that any resulting tax impact would be immaterial to the company's overall financial statements.
For a prospective Burros Fries franchisee, this indicates that the company is confident in its tax compliance. However, it is important to note that tax years 2020 through 2022 are currently open for examination by taxing authorities, as stated in the FDD. This means that there is still a possibility of adjustments to prior tax filings. The company's policy is to recognize any interest and penalties associated with its tax positions separately as interest and penalties expense.