What tax status has Closet Storage Concepts elected in New Jersey?

According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the company, Closets Unlimited of New Jersey, Inc., has elected to be taxed under Subchapter S of the Internal Revenue Code for federal and state income tax purposes. This means that Closet Storage Concepts itself does not pay corporate income taxes on its taxable income. Instead, the stockholder is liable for individual federal and state income taxes on the company's taxable income. Therefore, the financial statements do not include a provision or liability for federal income taxes, but there is a provision for required state income taxes.

In addition to the S corporation status, Closet Storage Concepts has also made an annual election for the 2024 New Jersey Pass-Through Business Alternative Income Tax (PTE). Under this election, the company agrees to pay tax due on the owner's share of the distributive proceeds. The owner can then claim a refundable tax credit for the amount of tax paid by the pass-through entity on their share of distributive proceeds.

It's important to note that Closet Storage Concepts' income tax filings are subject to audit by various taxing authorities. The company's open audit periods are 2021 through 2024. In evaluating the company's tax provisions and accruals, interpretations and tax planning strategies are considered, and the company believes its estimates are appropriate based on current facts and circumstances. This tax structure could have implications for franchisees, as it affects how the company's profits are taxed and distributed.