TXRH » Topics » (9) Income Taxes

These excerpts taken from the TXRH 10-K filed Feb 27, 2009.

Income Taxes

        We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Our effective tax rate for 2008 decreased to 33.7% from 35.0% in 2007. This decrease is primarily attributable to higher federal tax credits as a percentage of net income before income tax, offset by the non-deductibility of officers' compensation in 2008. Officers' compensation was fully deductible in 2007. We expect the effective tax rate to be approximately 34.0% for fiscal 2009.

        Our effective tax rate for 2007 decreased to 35.0% from 36.3% in 2006. This decrease in the rate was primarily due to higher tax credits, the non-deductibility of a $0.8 million charge related to franchise acquisitions in the first quarter of fiscal 2006 and a decrease in the non-deductible portion of certain incentive stock options relating to share-based compensation costs, partially offset by an increase in state income tax rates.

Income Taxes



        We account for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes
. Our effective tax rate for 2008 decreased to 33.7% from 35.0% in 2007. This decrease is primarily attributable to higher federal tax credits as a percentage of net
income before income tax, offset by the non-deductibility of officers' compensation in 2008. Officers' compensation was fully deductible in 2007. We expect the effective tax rate to be
approximately 34.0% for fiscal 2009.



        Our
effective tax rate for 2007 decreased to 35.0% from 36.3% in 2006. This decrease in the rate was primarily due to higher tax credits, the non-deductibility of a
$0.8 million charge related to franchise acquisitions in the first quarter of fiscal 2006 and a decrease in the
non-deductible portion of certain incentive stock options relating to share-based compensation costs, partially offset by an increase in state income tax rates.




This excerpt taken from the TXRH 10-Q filed Oct 31, 2008.

(9)   Income Taxes

 

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

 

The adoption of FIN 48 on December 27, 2006 did not result in any change to the Company’s unrecognized tax benefits.  The Company’s gross unrecognized tax benefits were $0.7 million at September 23, 2008 and December 25, 2007.  In addition, activity related to the Company’s unrecognized tax benefits was not material during the 39 weeks ended September 23, 2008.  The Company, consistent with its existing policy, recognizes both interest and penalties on recognized tax benefits as part of income tax expense.  As of September 23, 2008 and December 25, 2007, the total amount of accrued penalties and interest was $0.2 million.  Included in the balance of total unrecognized tax benefits at September 23, 2008 are potential benefits of $0.1 million, which, if recognized, would affect the effective tax rate on income before taxes.

 

All entities for which unrecognized tax benefits exist as of September 23, 2008 possess a December tax year-end.  As a result, as of September 23, 2008, the tax years ended December 28, 2004, December 27, 2005, December 26, 2006 and December 25, 2007 remain subject to examination by tax jurisdictions.  As of September 23, 2008, no audits were in process by a tax jurisdiction that, if completed during the next 12 months, would be expected to result in a material change to the Company’s unrecognized tax benefits.  Additionally, as of September 23, 2008, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 30, 2008.

 

13



This excerpt taken from the TXRH 10-Q filed Aug 1, 2008.

(9)   Income Taxes

 

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

 

The adoption of FIN 48 on December 27, 2006 did not result in any change to the Company’s unrecognized tax benefits.  The Company’s gross unrecognized tax benefits were $0.7 million at June 24, 2008 and December 25, 2007.  In addition, activity related to the Company’s unrecognized tax benefits was not material during the 26 weeks ended June 24, 2008.  The Company, consistent with its existing policy, recognizes both interest and penalties on recognized tax benefits as part of income tax expense.  As of June 24, 2008 and December 25, 2007, the total amount of accrued penalties and interest was $0.2 million.  Included in the balance of total unrecognized tax benefits at June 24, 2008 are potential benefits of $0.1 million, which, if recognized, would affect the effective tax rate on income before taxes.

 

All entities for which unrecognized tax benefits exist as of June 24, 2008 possess a December tax year-end.  As a result, as of June 24, 2008, the tax years ended December 28, 2004, December 27, 2005, December 26, 2006 and December 25, 2007 remain subject to examination by tax jurisdictions.  As of June 24, 2008, no audits were in process by a tax jurisdiction that, if completed during the next 12 months, would be expected to result in a material change to the Company’s unrecognized tax benefits.  Additionally, as of June 24, 2008, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 30, 2008.

 

12



This excerpt taken from the TXRH 10-Q filed May 1, 2008.

(9)   Income Taxes

 

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The

 

11



 

Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

 

The adoption of FIN 48 on December 27, 2006 did not result in any change to the Company’s unrecognized tax benefits.  The Company’s gross unrecognized tax benefits were $0.7 million at March 25, 2008 and December 25, 2007.  In addition, activity related to the Company’s unrecognized tax benefits was not material during the 13 weeks ended March 25, 2008.  The Company, consistent with its existing policy, recognizes both interest and penalties on recognized tax benefits as part of income tax expense.  As of March 25, 2008 and December 25, 2007, the total amount of accrued penalties and interest was $0.2 million.  Included in the balance of total unrecognized tax benefits at March 25, 2008 are potential benefits of $0.1 million, which, if recognized, would affect the effective tax rate on income before taxes.

 

All entities for which unrecognized tax benefits exist as of March 25, 2008 possess a December tax year-end.  As a result, as of March 25, 2008, the tax years ended December 28, 2004, December 27, 2005, December 26, 2006 and December 25, 2007 remain subject to examination by tax jurisdictions.  As of March 25, 2008, no audits were in process by a tax jurisdiction that, if completed during the next 12 months, would be expected to result in a material change to the Company’s unrecognized tax benefits.  Additionally, as of March 25, 2008, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 30, 2008.

 

These excerpts taken from the TXRH 10-K filed Feb 25, 2008.

(n) Income Taxes

        The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS No. 109"), under which deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and their respective tax bases. A valuation allowance is established to reduce the carrying value of deferred tax assets if it is considered more likely than not that such assets will not be realized. Any change in the valuation allowance would be charged to income in the period such determination was made.

        The Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FAS 109 ("FIN 48"), on December 27, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements prepared in accordance with SFAS 109, "Accounting for Income Taxes." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under FIN 48, a tax position adopted is subjected to two levels of evaluation. Initially, a determination is made as to whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In conducting this evaluation, management should presume that the position will be examined by the appropriate taxing authority possessing full knowledge of all relevant information. The second level of evaluation is the measurement of a tax position that satisfies the more-likely-than-not recognition threshold. This measurement is performed in order to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest

F-11


Texas Roadhouse, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(Tabular amounts in thousands, except share and per share data)

(2) Summary of Significant Accounting Policies (Continued)


amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 further requires tabular disclosure of material activity related to unrecognized tax benefits that do not satisfy the recognition provisions established under FIN 48.

(n) Income Taxes





        The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS
No. 109"), under which deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of
assets and liabilities and their respective tax bases. A valuation allowance is established to reduce the carrying value of deferred tax assets if it is considered more likely than not that such
assets will not be realized. Any change in the valuation allowance would be charged to income in the period such determination was made.




        The
Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48,
Accounting for Uncertainty in Income Taxes—an
interpretation of FAS 109
("FIN 48"), on December 27, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial
statements prepared in accordance with SFAS 109, "Accounting for Income Taxes." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. Under FIN 48, a tax position adopted is subjected to two levels of evaluation. Initially, a determination is made as to whether it is
more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In
conducting this evaluation, management should presume that the position will be examined by the appropriate taxing authority possessing full knowledge of all relevant information. The second level of
evaluation is the measurement of a tax position that satisfies the more-likely-than-not recognition threshold. This measurement is performed in order to determine
the amount of benefit to recognize in the financial statements. The tax position is measured at the largest



F-11








Texas Roadhouse, Inc. and Subsidiaries



Notes to Consolidated Financial Statements (Continued)



(Tabular amounts in thousands, except share and per share data)



(2) Summary of Significant Accounting Policies (Continued)






amount
of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 further requires tabular disclosure of material activity related to
unrecognized tax benefits that do not satisfy the recognition provisions established under FIN 48.





This excerpt taken from the TXRH 10-Q filed Nov 2, 2007.

(9)   Income Taxes

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

As a result of the implementation of FIN 48, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.  At the adoption date of December 27, 2006 and as of September 25, 2007, the Company had no significant unrecognized income tax benefits or accrued interest or penalties related to uncertain tax positions.  The Company does not expect that the amounts of any unrecognized income tax benefits will change significantly within the next 12 months.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and have not had a material effect on its consolidated financial position, results of operations or cash flows.  In the event the Company receives an assessment for interest and/or penalties, it has been classified in the financial statements as income tax expense.

The tax years 2003 - 2006 remain open to examination by the major taxing jurisdictions to which we are subject.

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This excerpt taken from the TXRH 10-Q filed Aug 2, 2007.

(8)   Income Taxes

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

As a result of the implementation of FIN 48, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.  At the adoption date of December 27, 2006 and as of June 26, 2007, the Company had no significant unrecognized income tax benefits or accrued interest or penalties related to uncertain tax positions.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results.  In the event the Company receives an assessment for interest and/or penalties, it has been classified in the financial statements as income tax expense.

The tax years 2003 - 2006 remain open to examination by the major taxing jurisdictions to which we are subject.

This excerpt taken from the TXRH 10-Q filed May 3, 2007.

(8)   Income Taxes

The Company’s effective tax rate for the 13 weeks ended March 27, 2007 decreased to 36.2% from 40.0% for the 13 weeks ended March 28, 2006.  The decrease in the rate in the first quarter of fiscal 2007 was primarily due to the non-deductibility of a $0.8 million charge related to franchise acquisitions in Q1 2006 and a decrease in the non-deductible portion of certain incentive stock options relating to share-based compensation costs.

In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FAS 109 (“FIN 48”), was issued.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted the provisions of FIN 48 on December 27, 2006, the first day of the Company’s 2007 fiscal year.

As a result of the implementation of FIN 48, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.  At the adoption date of December 27, 2006 and as of March 27, 2007, the Company had no significant unrecognized income tax benefits or accrued interest or penalties related to uncertain tax positions.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results.  In the event the Company receives an assessment for interest and/or penalties, it is classified in the consolidated statements of income as income tax expense.

The tax years 2003 - 2006 remain open to examination by the major taxing jurisdictions to which we are subject.

9




This excerpt taken from the TXRH 10-K filed Feb 23, 2007.

(n) Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”), under which deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and their respective tax bases. A valuation allowance is established to reduce the carrying value of deferred tax assets if it is considered more likely than not that such assets will not be realized. Any change in the valuation allowance would be charged to income in the period such determination was made.

Prior to converting to a “C” corporation on October 8, 2004, the Company operated as a limited liability company and was taxed as a partnership. As such, the Company’s income or losses were passed through to its owners who are liable for any related income taxes.

This excerpt taken from the TXRH 10-Q filed May 8, 2006.

(9)   Income Taxes

Due to the adoption of SFAS 123R and the charge of $0.8 million relating to the application of EITF 04-1, the Company’s effective tax rate in the 13 weeks ended March 28, 2006 increased to 40.0% from 35.3% for the 13 weeks ended March 29, 2005. A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the 13 weeks ended March 28, 2006 and March 29, 2005, respectively, is as follows:

 

March 28, 2006

 

March 29, 2005

 

 

 

 

 

 

 

Tax at statutory federal rate

 

35.0

%

35.0

%

State and local tax, net of federal benefit

 

3.1

 

3.3

 

FICA tax credit

 

(3.3

)

(2.8

)

Incentive stock options

 

2.5

 

 

EITF 04-1 charge relating to acquisition

 

2.2

 

 

Other

 

0.5

 

(0.2

)

Total

 

40.0

%

35.3

%

 

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This excerpt taken from the TXRH 10-K filed Mar 7, 2006.

(n)   Income Taxes

In connection with the Company’s reorganization and initial public offering, the Company became a “C” Corporation subject to federal and state income taxes. The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”), under which deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and their respective tax bases. A valuation allowance is established to reduce the carrying value of deferred tax assets if it is considered more likely than not that such assets will not be realized. Any change in the valuation allowance would be charged to income in the period such determination was made. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Prior to converting to a “C” corporation on October 8, 2004, the Company operated as a limited liability company and was taxed as a partnership. As such, the Company’s income or losses were passed through to its owners who are liable for any related income taxes.

F-11




This excerpt taken from the TXRH 10-K filed Mar 25, 2005.

(10) Income Taxes

        In connection with the closing of the reorganization and initial public offering on October 8, 2004, the Company converted from a limited liability company to a "C" corporation and established beginning balances in its deferred tax assets and liabilities in accordance with SFAS No. 109. Accordingly, the Company recorded a cumulative net deferred tax liability of $5.0 million on that date.

        Components of the Company's income tax benefit and provision for the period following the Company's conversion to a "C" corporation on October 8, 2004 through December 28, 2004, including the $5.0 million deferred tax charge discussed above, are as follows:

 
  October 8, 2004
through
December 28, 2004

Current:      
Federal   $ 2,232
State     394
   
  Total current     2,626
Deferred:      
Federal     3,960
State     573
   
  Total deferred     4,533
   
Income tax provision   $ 7,159
   

F-20


        A reconciliation of the statutory federal income tax rate to the Company's effective tax rate for October 8, 2004 through December 28, 2004, which excludes the $5.0 million deferred tax charge discussed above, is as follows:

 
  October 8, 2004
through
December 28, 2004

 
Tax at statutory federal rate   34.0 %
State and local tax, net of federal benefit   3.4  
FICA tax credit   (4.2 )
Other   .4  
   
 
Total   33.6 %
   
 

        Components of deferred tax assets (liabilities) are as follows:

 
  December 28,
2004

 
Deferred tax assets:        
Insurance Reserves   $ 1,299  
Other reserves     9  
Deferred rent     710  
Other assets & liabilities     278  
   
 
Total deferred tax asset     2,296  
   
 
Deferred tax liabilities:        
Depreciation and amortization     (6,897 )
   
 
Total deferred tax liability     (6,897 )
   
 
Net deferred tax liability   $ (4,601 )
   
 
Current deferred tax asset   $ 1,308  
Noncurrent deferred tax liability     (5,909 )
   
 
    $ (4,601 )
   
 

The Company has not provided any valuation allowance as it believes the realization of its deferred tax assets is more likely than not.

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