What was the total amount of deferred income tax assets for the Carls franchise in 2023?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
$ 8,865 |
The following is a reconciliation of income tax expense at the federal statutory rate of 21.0% to our income tax expense for fiscal 2024 and 2023, respectively:
| Fiscal 2024 | Fiscal 2023 | |
|---|---|---|
| Income tax expense at statutory rate | $ 12,942 | $ 7,691 |
| State income taxes, net of federal income tax effect | 2,986 | 1,281 |
| Nondeductible share-based compensation | 446 | 163 |
| General business credits | (640) | (503) |
| Nondeductible foreign losses | 230 | 1,010 |
| Uncertain tax pos |
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the total deferred income tax assets for 2023 was $183,796. This figure represents the sum of various components, including operating lease liabilities ($120,996), financing method sale-leaseback obligations ($34,819), interest limitation carryforward ($10,245), reserves and allowances ($8,512), franchise fees ($8,023), net operating loss carryforwards ($5,982), and federal and state tax credits ($4,624), offset by a valuation allowance ($-9,405).
Deferred income tax assets typically arise when there are differences between the accounting treatment and the tax treatment of certain items. For example, the operating lease liabilities contribute a significant portion to the total deferred tax assets. These assets can be used to reduce future income tax obligations, providing a potential benefit to Carls.
The valuation allowance ($-9,405) is a reduction in the deferred tax asset to reflect the possibility that some portion of the asset may not be realized in the future. This is a standard accounting practice, and the net figure ($183,796) represents the amount that Carls believes is more likely than not to be realized. Prospective franchisees should be aware of these deferred tax items, as they can impact the overall financial health and tax planning strategies of the franchise.