Why does Embassy Suites not make provisions in its accounts for U.S. income taxes?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
No provision is made in our accounts for U.S. income taxes because for U.S. income tax purposes, we are treated as a disregarded entity and all items of taxable income and expense are included in the computation of taxable income of Hilton. The results of operations reflected in the accompanying statements of comprehensive income and member's equity may differ from amounts reported in Hilton's federal income tax returns because of differences in accounting policies adopted for financial and tax reporting purposes.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Embassy Suites does not make provisions for U.S. income taxes in its accounts because, for U.S. income tax purposes, it is treated as a disregarded entity. This means that all items of taxable income and expense are included in the computation of taxable income of Hilton.
In simpler terms, Embassy Suites itself doesn't directly pay U.S. income taxes. Instead, its financial results are consolidated into the tax return of its parent company, Hilton. This is a common practice for wholly-owned subsidiaries.
The FDD also notes that the results of operations reflected in Embassy Suites' statements of comprehensive income and member's equity may differ from amounts reported in Hilton's federal income tax returns. This is due to differences in accounting policies adopted for financial and tax reporting purposes. Prospective franchisees should be aware that the financial performance of Embassy Suites as presented in its financial statements might not directly correlate to the figures used for Hilton's overall tax obligations.