XML 41 R23.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2023, 2022 and 2021 was as follows:
 Year Ended December 31,
 202320222021
(In millions)
Current   
Federal$25.6 $27.5 $20.2 
State0.6 5.5 4.6 
Foreign2.2 1.8 1.4 
28.4 34.8 26.2 
Deferred   
Federal(1.2)(3.8)(2.3)
State(12.6)2.7 0.2 
(13.8)(1.1)(2.1)
Provision for income taxes$14.5 $33.7 $24.1 
The provision (benefit) for income taxes differs from the expected federal income tax rates as follows:
Year Ended December 31,
202320222021
Statutory federal income tax rate21.0 %21.0 %21.0 %
Non-deductibility of goodwill— 0.8 — 
Non-deductibility of officer's compensation1.1 2.9 2.2 
State and other taxes, net of federal tax benefit3.8 3.1 3.1 
State income tax audit settlement(13.5)— — 
Excess tax deficiencies(0.7)(0.5)(7.1)
Change in unrecognized tax benefits1.1 — (0.1)
Change in valuation allowance0.7 (0.3)0.5 
Changes in tax rates and state tax laws— 3.4 0.2 
General business credits(0.7)(1.4)(0.9)
Other0.2 0.3 0.8 
Effective tax rate13.0 %29.3 %19.7 %
The fiscal year 2023 effective tax rate of 13.0% applied to pretax book income was different than the statutory Federal income tax rate of 21% primarily due to the conclusion of a state income tax settlement, resulting in a net income tax benefit of $15.1 million.
The fiscal year 2022 effective tax rate of 29.3% applied to pretax book income was different than the statutory Federal income tax rate of 21% due to the state and local income taxes and the non-deductibility of executive compensation. The effective tax rate further increased due to the increase in the effective state tax rate applied to revaluing deferred tax balances. The increase in the effective state tax rate was due to the non-recurring refranchising of 69 Applebee’s company-operated restaurants in the fourth quarter of 2022 and various state legislative changes.
The fiscal year 2021 effective tax rate of 19.7% applied to pretax book loss was different than the statutory Federal income tax rate of 21% primarily due to the one-time recognition of excess tax benefits on stock-based compensation, offset by non-deductibility of executive compensation and state and local income taxes.
The Company files federal income tax returns and the Company or one of its subsidiaries file income tax returns in various state and international jurisdictions. With few exceptions, the Company is no longer subject to federal tax examinations by tax authorities for years before 2020 and state or non-United States tax examinations by tax authorities for years before 2018. The Company believes that adequate reserves have been recorded relating to all matters contained in the tax periods open to examination.
Net deferred tax assets (liabilities) at December 31, 2023 and 2022 consisted of the following components:
20232022
 (In millions)
Lease liabilities$93.2 $93.6 
Employee compensation9.4 9.7 
Revenue recognition37.2 37.1 
Tax attributes14.9 5.3 
Other4.5 3.1 
Deferred tax assets159.2 148.8 
Valuation allowance(4.4)(3.5)
Total deferred tax assets after valuation allowance154.8 145.3 
Recognition of franchise and equipment sales
(4.9)(6.7)
Capitalization and depreciation(1)
(123.7)(121.0)
Lease assets(85.5)(90.8)
Other(1.5)(1.5)
Deferred tax liabilities(215.6)(220.0)
Net deferred tax liabilities$(60.8)$(74.7)
______________________________
(1) Primarily related to the 2007 Applebee's acquisition.
As of each reporting date, the Company considers new evidence, both positive and negative, that could impact management’s view with regards to future realization of deferred tax assets. Management believes that the future realizability of benefits arising from foreign tax credit carryforwards and certain state net operating loss carryforwards does not meet the more-likely-than-not threshold. In recognition of this risk, there is a valuation allowance of $4.4 million as of December 31, 2023.
The Company had gross operating loss carryforwards for state tax purposes of $127.8 million and $37.9 million as of December 31, 2023 and 2022, respectively. Certain net operating loss carryforwards will expire in 2029 if not utilized. The Company had income tax credit carryforwards of $7.4 million and $3.4 million as of December 31, 2023 and 2022, respectively. Certain income tax credit carryforwards will begin to expire in 2029 if not utilized. The increase in gross operating loss carryforwards and income tax credit carryforwards compared to prior year is primarily due to the conclusion of a state income tax audit settlement.
The total gross unrecognized tax benefit as of December 31, 2023 and 2022 was $3.5 million and $2.1 million, respectively, excluding interest, penalties and related income tax benefits. If recognized, these amounts would affect the Company's effective income tax rates.
The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by $0.4 million related to settlements with taxing authorities and statute of limitations expirations. For the remaining liability, due to the uncertainties related to these tax matters, the Company is unable to make a reasonable estimate as to when cash settlement with a taxing authority will occur. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year Ended December 31,
202320222021
(In millions)
Unrecognized tax benefit as of January 1$2.1 $1.9 $2.2 
Changes for tax positions of prior years— 0.1 0.5 
Increases for tax positions related to the current year1.9 0.4 0.3 
Decreases relating to settlements and lapsing of statutes of limitations(0.5)(0.3)(1.1)
Unrecognized tax benefit as of December 31$3.5 $2.1 $1.9 
As of December 31, 2023, the accrued interest was $0.9 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, 2022, the accrued interest and penalties were $0.7 million and less than $0.1 million, respectively, excluding any related income tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of the income tax provision recognized in the Consolidated Statements of Comprehensive Income.