XML 30 R18.htm IDEA: XBRL DOCUMENT v3.22.2.2
Income Taxes
 12 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense (benefit) consisted of the following (in thousands):
Years Ended September 30,
202220212020
Current
Federal$8,335 $4,598 $215 
State and local2,656 644 560 
Total current income tax expense10,991 5,242 775 
Deferred
Federal2,080 (161)(1,248)
State and local1,000 (1,092)(20)
Total deferred income tax expense (benefit)3,080 (1,253)(1,268)
Total income tax expense (benefit)$14,071 $3,989 $(493)
The Company and its subsidiaries do not operate in tax jurisdictions outside of the United States.
Income tax expense (benefit) differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate to earnings before income taxes for the years ended September 30 as a result of the following (in thousands):
202220212020
Federal statutory income tax expense (benefit)$12,628 $7,169 $(1,429)
State income taxes, net of federal benefit1,801 716 253 
Permanent differences96 (434)395 
Change in state tax rate896 (804)— 
Change in valuation allowance343 (632)1,273 
Tax credits(1,796)(1,207)(945)
Other103 (819)(40)
Total income tax expense (benefit)$14,071 $3,989 $(493)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
September 30,
20222021
Deferred tax assets:
Net operating loss carryforwards$1,022 $664 
Capital loss carryforwards234 899 
Right-of-use assets626 335 
Accrued expenses240 148 
Stock-based compensation569 — 
Other— 6 
Valuation allowance(984)(641)
1,707 1,411 
Deferred tax liabilities:
Intangibles(21,927)(12,174)
Property and equipment(10,119)(8,132)
Prepaid expenses(205)(242)
Other(18)— 
(32,269)(20,548)
$(30,562)$(19,137)
Included in the Company’s deferred tax liabilities at September 30, 2022 and 2021 is the tax effect of indefinite-lived intangible assets from club acquisitions amounting to approximately $32.9 million and $17.1 million, respectively, which are not deductible for tax purposes. These deferred tax liabilities will remain in the Company’s consolidated balance sheet until the related clubs are sold or impaired.
The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of accrued liabilities. We recognize penalties related to unrecognized tax benefits as a component of selling, general and administrative expenses, and recognize interest accrued
related to unrecognized tax benefits in interest expense. In fiscal 2019, the Company released the remaining amount accrued when the examination was closed.
The full balance of uncertain tax positions, if recognized, would affect the Company’s annual effective tax rate, net of any federal tax benefits. The Company does not expect any changes that will significantly impact its uncertain tax positions within the next twelve months.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. The Company’s federal income tax returns for the years ended September 30, 2013 through 2017 have been examined by the Internal Revenue Service (“IRS”) with no changes. The Company ordinarily goes through various federal and state reviews and examinations for various tax matters. Fiscal year ended September 30, 2019 and subsequent years remain open to federal tax examination. The Company is also being examined for state income taxes, the outcome of which may occur within the next twelve months.
On March 27, 2020, former President Trump signed the CARES Act into law. As a result of this, additional avenues of relief were available to workers and families through enhanced unemployment insurance provisions and to small businesses through programs administered by the Small Business Administration. The CARES Act included, among other items, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program, whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The loan may be forgiven if the funds are used for payroll and other qualified expenses. The Company submitted its application for a PPP loan and on May 8, 2020 received approval and funding for its restaurants, shared service entity and lounge. Ten of our restaurant subsidiaries received amounts ranging from $271,000 to $579,000 for an aggregate amount of $4.2 million; our shared-services subsidiary received $1.1 million; and one of our lounges received $124,000. None of our adult nightclub and other non-core business subsidiaries received funding under the PPP. The Company believes it used the entire loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company utilized all of the PPP funds and submitted its forgiveness applications. During fiscal 2021, we received 11 Notices of PPP Forgiveness Payment from the Small Business Administration out of the 12 of our PPP loans granted. All of the notices received forgave 100% of each of the 11 PPP loans totaling the amount of $5.3 million in principal and interest and were included in non-operating gains (losses), net in our consolidated statement of operations for the fiscal year ended September 30, 2021. In November 2021, we received a partial forgiveness of the remaining $124,000 PPP loan for $85,000 in principal and interest. The remaining unforgiven portion of approximately $41,000 in principal was fully paid as debt plus accrued interest in fiscal 2022.