How does Hardees determine the income taxes attributable to CKE Restaurants and its subsidiaries?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | |||
|---|---|---|---|
| Deferred income tax assets: | |||
| Operating lease liabilities | $ 107,272 | $ 115,1 | 175 |
| Financing method sale-leaseback obligations | 27,325 | 32,2 | 229 |
| Interest limitation carryforward | 18,511 | 13,3 | 345 |
| Reserves and allowances | 9,049 | 5,5 | 546 |
| Franchise fees | 7,767 | 7,8 | 303 |
| Net operating loss carryforwards | 290 | 4,7 | 749 |
| Federal and state tax credits | 129 | 4,5 | 536 |
| Valuation allowance | (204 | (8,7 | 747) |
| Total deferred income tax assets | 170,139 | 174,6 | 536 |
| Deferred income tax liabilities: | |||
| Goodwill and other intangible assets | (193,715 | (198,3 | 306) |
| Operating lease assets | (101,711 | (110,0 | 061) |
| Basis difference in property and equipment | (22,829 | (24,4 | 77) |
| Advertising funds | (5,618 | (8,2 | 234) |
| Other items | (5,790 | (4,9 | 951) |
| Total deferred income tax liabilities | (329,663 | (346,0 | 029) |
| Deferred income tax liabilities, net | $ (159,524 | $ (171,3 | 393) |
We are included in the consolidated federal income tax returns and combined state income tax returns of CKE Holding Corporation. For the purpose of determining the income taxes attributable to CKE Restaurants and its subsidiaries, we prepare our income tax provision as if we were a separate taxpayer. As a result of this treatment, we make income tax payments to our corporate parent based upon our separate return taxable income. We additionally make income tax payments directly to federal, state, local and foreign taxing jurisdictions. As of January 31, 2025 and 2024, our income tax payable to our corporate parent was $13,459 and $13,269, respectively. During fiscal 2025 and 2024, we did not make any income tax payments to CKE Holding Corporation and made $17,342 and $15,426 in income tax payments net o
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, Hardees is included in the consolidated federal income tax returns and combined state income tax returns of CKE Holding Corporation. To determine the income taxes attributable to CKE Restaurants and its subsidiaries, Hardees prepares its income tax provision as if it were a separate taxpayer. As a result, Hardees makes income tax payments to its corporate parent based upon its separate return taxable income. Hardees also makes income tax payments directly to federal, state, local, and foreign taxing jurisdictions.
As of January 31, 2025, and 2024, Hardees' income tax payable to its corporate parent was $13,459 and $13,269, respectively. During fiscal years 2025 and 2024, Hardees did not make any income tax payments to CKE Holding Corporation. Instead, it made $17,342 and $15,426 in income tax payments, net of refunds, directly to taxing authorities.
Additionally, as of January 31, 2025, and 2024, Hardees maintained a valuation allowance of $204 and $8,747, respectively, for a portion of its state income tax credits and certain state and foreign net operating loss (NOL) carryforwards. This was because Hardees concluded that the realization of the tax benefit of such deferred income tax assets was not more likely than not. By fiscal 2025, Hardees only maintained a valuation against state NOL carryforwards, as state enterprise zone credits expired after fiscal 2024, and the company liquidated its Shanghai entity, removing the need for a valuation allowance against foreign NOL carryforwards. During fiscal 2025, Hardees decreased its valuation allowance by $8,543.
Hardees' current provision for income taxes is based on its estimated taxable income in each jurisdiction where it operates. This calculation considers the impact on taxable income from temporary differences, such as depreciation, interest expense, advertising funds, sale-leaseback transactions, various reserves, tax credits, and net operating losses (NOL), for tax and financial reporting purposes. Hardees records deferred income taxes for the estimated future income tax effect of temporary differences between the financial and tax bases of assets and liabilities, using the asset and liability method. Deferred income tax assets are also recorded for NOL and income tax credit carryforwards. A valuation allowance is established to reduce the carrying amount of deferred income tax assets when it is more likely than not that Hardees will not realize the tax benefit.