XML 104 R22.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 12 — Income Taxes
The Company’s income tax expense (benefit) consisted of the following:
Year Ended December 31,
(in thousands)202320222021
Current tax provision
Federal$193 $181 $170 
State844 1,340 865 
Total current tax provision1,037 1,521 1,035 
Deferred tax expense (benefit)
Federal1,605 (6,081)(2,265)
State4,325 7,159 (398)
Total deferred tax provision5,930 1,078 (2,663)
Income tax expense (benefit)$6,967 $2,599 $(1,628)
The Company’s effective income tax rate differs from the U.S. federal statutory income tax rate as itemized below:
Year Ended December 31,
202320222021
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
Income allocable to non-controlling interests not subject to tax6.3 %(32.9)%(18.4)%
State and local income taxes, net of federal benefit10.1 %(9.5)%(0.8)%
State rate adjustment17.5 %(39.1)%— %
Net impact of GAAP basis shifts— %— %(0.2)%
Non-deductible compensation0.7 %(2.0)%(0.2)%
Tax credits(12.9)%10.1 %0.3 %
TRA adjustments0.2 %4.4 %— %
Return-to-provision adjustments(5.4)%32.4 %— %
Stock-based compensation
3.8 %— %— %
Other0.4 %— %— %
Valuation allowance(0.5)%— %(0.3)%
Effective income tax rate41.2 %(15.6)%1.4 %
The components of the Company’s deferred tax assets are as follows:
(in thousands)December 31, 2023December 31, 2022
Deferred tax assets
Investment in Dutch Bros OpCo $346,172 $255,763 
Net operating loss carryforwards34,988 19,356 
Interest expense14,187 7,781 
Credit carryforwards4,991 2,813 
Charitable contribution carryforward1,546 1,498 
Other2,130 2,661 
Total deferred tax assets404,014 289,872 
Less: valuation allowance(1,019)(1,107)
Net deferred tax assets$402,995 $288,765 
The Company recognizes deferred tax assets to the extent, based on available evidence, that it is more likely than not that they will be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations. For the year ended December 31, 2023, the Company recorded a valuation allowance on its deferred tax assets, primarily related to the Company’s charitable contributions, of which it does not expect to recognize the benefit from in the foreseeable future. The Company has no deferred tax liabilities.
As of December 31, 2023, the Company had U.S. federal net operating losses of $142.8 million and tax credit carryforwards of approximately $5.0 million. The Company’s federal net operating losses do not expire and tax credits will begin to expire in 2038 if not utilized. As of December 31, 2023, the Company had $95.0 million of state tax net operating losses and no state tax credits. Of the state tax net operating losses, $90.0 million will begin to expire in 2033 if not utilized and the remaining $5.0 million do not expire.
Utilization of net operating losses, credit carryforwards, and certain deductions may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The tax benefits related to future utilization of federal and state net operating losses, tax credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examinations from various taxing authorities.
There were no interest and penalties accrued for the three years ended December 31, 2023. The Company has assessed its tax positions taken and concluded there are no significant uncertain tax positions. The Company has no unrecognized tax benefits as of December 31, 2023 or 2022, that, if recognized, would affect the amount of income tax expense reported.
The Company files returns with the Internal Revenue Service and multiple state jurisdictions, which are subject to examination by the taxing authorities for years 2018 and later. The earlier tax years are subject to examination due to the utilization of net operating losses in recent tax years. None of our federal or state income tax returns are currently under examination by federal or state taxing authorities.