El Pollo Loco 2015 Annual Report Download - page 89

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Table of Contents
EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. INCOME TAXES
The provision for income taxes is based on the following components (in thousands):
The provision for income taxes differs from the amount computed by applying the federal income tax rate as follows:
Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected
to be realized.
The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets. After evaluating all of the positive
and negative evidence, including the Company’
s continued income from operations and the reduction in interest expense resulting from the 2014
and 2013 refinancing of debt and from the Company’s IPO and resultant payoff of the 2013 Second Lien Term Loan, the Company concluded
that it is more likely than not that its deferred tax assets will be realized. As a result, in fiscal 2014, the Company released its valuation allowance
of approximately $65 million, which was recorded as a benefit to income taxes. The valuation allowance increased $6.3 million in fiscal 2013.
85
For the Years Ended
December 31,
2014
December 25,
2013
December 26,
2012
Current income taxes:
Federal
$
(1
)
$
—
$
2
State
29
30
26
Total current
28
30
28
Deferred income taxes:
Federal
(44,137
)
1,037
1,013
State
(22,864
)
334
986
Total deferred
(67,001
)
1,371
1,999
Charge in lieu of tax (attributable to stock options)
3,965
—
—
Tax provision for income taxes
$
(63,008
)
$
1,401
$
2,027
For the Years Ended
December 31,
2014
December 25,
2013
December 26,
2012
Statutory federal income tax rate of 35%
applied to earnings before income taxes
and extraordinary items
35.0
%
35.0
%
35.0
%
State tax benefit (net of federal benefit)
(5.7
)
5.4
12.7
State tax credits
32.7
—
—
TRA expense
(70.6
)
—
—
Change in tax rate
—
—
(
15.5
)
Change in valuation allowance
317.4
(43.4
)
(75.9
)
Other
(1.7
)
(6.5
)
5.2
Total
307.1
%
(9.5
)%
(38.5
)%