Chipotle 2008 Annual Report Download - page 50

Deferred income tax liabilities are taxes the Company expects to pay in future periods. Similarly, deferred
income tax assets are recorded for expected reductions in taxes payable in future periods. Deferred income taxes
arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax
liabilities and assets consist of the following:
December 31,
2008 2007
Long-term deferred income tax liability:
Leasehold improvements, property and equipment ................................. $61,215 $38,805
Goodwill and other assets ..................................................... 641 330
Total long-term deferred income tax liability ...................................... 61,856 39,135
Long-term deferred income tax asset:
Deferred rent ............................................................... 21,560 16,645
Gift card liability ............................................................ 70 452
Capitalized transaction costs ................................................... 503 521
Stock-based compensation and other employee benefits ............................. 10,292 5,555
Foreign net operating loss carry-forwards ........................................ 53 —
Valuation allowance ......................................................... (485) (521)
Total long-term deferred income tax asset ........................................ 31,993 22,652
Net long-term deferred income tax liability ....................................... 29,863 16,483
Current deferred income tax liability:
Prepaid assets and other ...................................................... 1,021 596
Total current deferred income tax liability ........................................ 1,021 596
Current deferred income tax asset:
Allowances, reserves and other ................................................. 3,601 2,683
Stock-based compensation and other employee benefits ............................. 85 344
Valuation allowance ......................................................... (108) —
Total current deferred income tax asset .......................................... 3,578 3,027
Net current deferred income tax asset ............................................ 2,557 2,431
Total deferred income tax liability .............................................. $27,306 $14,052
As of December 31, 2008 and 2007 the Company had no unrecognized tax benefits. There was no change in
the amount of unrecognized tax benefits as a result of tax positions taken during the year or in prior periods or
due to settlements with taxing authorities or lapses of applicable statute of limitations. The Company is open to
federal and state tax audits until the applicable statute of limitations expire. Tax audits by their very nature are
often complex and can require several years to complete. The Company is no longer subject to U.S. federal tax
examinations by tax authorities for tax years before 2006. For the majority of states where the Company has a
significant presence, it is no longer subject to tax examinations by tax authorities for tax years before 2005. The
Company’s foreign net operating losses can be carried over to 2028.
At the consummation of the Company’s initial public offering, the Company exited McDonald’s
consolidated tax group for federal and some state tax purposes. At the consummation of the Disposition, the
Company exited McDonald’s consolidated tax group for the remaining states. Due to the exit from McDonald’s
consolidated federal tax group, the Company eliminated the deferred tax asset related to the post-acquisition net
operating loss carry-forwards of $32,859 and alternative minimum tax credits of $918 through equity. As a
result, the Company converted to a net long-term deferred tax liability position. There were no other significant
changes to the Company’s deferred tax balances as a result of the tax deconsolidation.
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Annual Report