What conditions does Checkersrallys use to evaluate uncertain tax positions?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates uncertain tax positions based upon one of the following conditions: (1) the tax position is not more likely than not to be sustained; (2) the tax position is more likely than not to be sustained, but for a lesser amount; or (3) the tax position is more likely than not to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) the Company presumes the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities, such as legislation and statutes, legislative intent, regulations, rulings, and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. The Company recognizes interest and penalties associated with uncertain tax positions as part of its income tax provision. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. Although the outcome of tax audits is always uncertain, the Company believes adequate amounts of tax, including interest and penalties, have been provided for any adjustments that are expected to result from those years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company has specific conditions for evaluating uncertain tax positions. These conditions include situations where (1) the tax position is deemed not more likely than not to be sustained, (2) the tax position is more likely than not to be sustained, but only for a lesser amount, or (3) the tax position is more likely than not to be sustained, but not within the same financial period it was initially taken.
In assessing the uncertainty of a tax position, Checkersrallys operates under certain assumptions. Firstly, it is presumed that the relevant taxing authority will examine the tax position with full awareness of all pertinent information. Secondly, the technical merits of a tax position are evaluated based on authorities such as legislation, statutes, legislative intent, regulations, rulings, and case law, considering their applicability to the specific facts and circumstances. Lastly, each tax position is assessed independently, without factoring in the possibility of offsets or aggregation with other tax positions.
Checkersrallys recognizes that interest and penalties associated with uncertain tax positions are part of its income tax provision. The FDD notes that the resolution of uncertain tax positions through audits can take several years. While the outcomes of tax audits are inherently uncertain, Checkersrallys states that it believes it has adequately provided for any adjustments, including interest and penalties, that may arise from these audits.