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INCOME TAXES | 6 Months Ended
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Jun. 29, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES We are the sole managing member of Portillo's OpCo, and as a result, consolidate the financial results of Portillo's OpCo. Portillo's OpCo is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Portillo's OpCo is generally not subject to U.S. federal and state and local income taxes. Any taxable income or loss generated by Portillo's OpCo is passed through to and included in the taxable income or loss of its members, including us, based upon the respective member's ownership percentage in Portillo's OpCo. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of Portillo's OpCo, as well as any stand-alone income or loss generated by Portillo's Inc. Income Tax Expense The effective income tax rate for the quarter and two quarters ended June 29, 2025 was 26.8% and 26.4%, respectively, and 29.1% and 14.5%, respectively, for the quarter and two quarters ended June 30, 2024. The decrease in our effective income tax rate for the quarter ended June 29, 2025 compared to the quarter ended June 30, 2024 was primarily driven by the decrease in the valuation allowance recorded against a portion of the Company's deferred tax assets as a result of the redemption of LLC Units that occurred in the second quarter of 2025. The increase in our effective income tax rate for the two quarters ended June 29, 2025 compared to the two quarters ended June 30, 2024 was primarily driven by an increase in the Company's ownership interest in Portillo's OpCo, which increases its share of taxable income (loss) of Portillo's OpCo. The Company’s annual effective tax rate differs from the statutory rate of 21% primarily because of state and local taxes, deferred tax adjustments and impacts from equity-based award activity partially offset by the portion of Portillo's OpCo earnings that are attributable to non-controlling interest that the Company is not liable for federal or state income taxes. We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of June 29, 2025, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets relating to the basis difference in its investment in Portillo's OpCo that will never be realizable or only reverse upon the eventual sale of its interest in Portillo's OpCo, which we expect would result in a capital loss which we do not expect to be able to utilize) are more likely than not to be realized. Tax Receivable Agreement In the second quarter of 2025, in connection with the redemption of LLC Units further discussed in Note 15. Related Party Transactions, 7,290,465 LLC units in the aggregate were redeemed for newly-issued shares of Class A common stock on a one-for-one basis, in accordance with the terms of the Second Amended and Restated LLC agreement of Portillo's OpCo, dated as of October 20, 2021. As a result, an increase in the tax basis of assets of Portillo's OpCo subject to the provision of the TRA was recorded. The Company recorded a deferred tax asset of $16.7 million and an additional TRA liability of $38.5 million. As of June 29, 2025, we estimated that our obligation for future payments under the TRA liability totaled $352.9 million. During the two quarters ended June 29, 2025 and June 30, 2024, the Company made TRA payments of $7.7 million relating to tax year 2023 and $4.4 million relating to tax year 2022, respectively. We expect a payment of $9.2 million relating to tax year 2024 to be paid within the next 12 months.

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