What does Burros Fries management believe regarding their tax positions in the event of an audit?
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 the 2024 Burros Fries Franchise Disclosure Document, management believes that the tax positions the company has taken would be sustained if the company was audited. They also believe that any resulting tax from an audit would be immaterial to the company's financial statements as a whole.
The FDD also states that no tax years are currently under audit. However, tax years 2020 through 2022 are currently open for examination by taxing authorities. This means that while the company isn't undergoing an active audit for those years, the taxing authorities still have the ability to review and potentially challenge their tax filings for those years.
Burros Fries's policy is to recognize any interest and penalties associated with its tax positions separately as interest and penalties expense, respectively. This is a standard accounting practice, ensuring transparency in how these costs are reported on the company's financial statements. A prospective franchisee should be aware of these potential costs and how they are handled in the event of a tax audit or challenge.