El Pollo Loco 2015 Annual Report Download - page 91

Table of Contents
EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 2014, the Company has federal and state NOL carryforwards of approximately $116 million and $134 million, respectively,
which expire beginning in 2025 and 2015, respectively. The Company also has state enterprise zone credits of approximately $10.6 million,
which carry forward for 10 years, and federal and state alternative minimum tax (“AMT”) credits of approximately $0.2 million, which carry
forward indefinitely. The utilization of NOL carryforwards may be subject to limitations under section 382 of the Internal Revenue Code of 1986
(the “Code”) and similar state law provisions. In fiscal 2014, the Company completed a section 382 analysis and determined that all of the
Company’s NOL carryforwards and other tax attributes are subject to limitation under section 382. However, that limitation did not impact the
Company’s current year tax liability.
The Company has elected to utilize the tax-law-ordering approach with respect to excess share-based compensation deductions. Under this
approach, the utilization of excess tax deductions associated with share-based awards is dictated by provisions in the tax law that identify the
sequence in which such benefits are utilized for tax purposes. In fiscal 2014, the Company recognized an excess tax deduction of approximately
$9.9 million, and the windfall tax benefit of approximately $4.0 million was recorded in additional paid-in capital (“APIC”) pursuant to the tax-
law-ordering approach.
Recently enacted tax laws may also affect the tax provision on the Company’
s consolidated financial statements. The state of California passed a
new law which mandates the use of a single sales factor apportionment formula for tax years beginning on or after January 1, 2013. As a result,
the state deferred tax assets were revalued during the year ended December 25, 2013 in order to account for the change in the tax law. As of
December 31, 2014, there was no valuation allowance against the state deferred tax asset. As of December 25, 2013, there was a 100% valuation
allowance against the state deferred tax asset.
As of December 31, 2014, December 25, 2013, and December 26, 2012, the Company had no accrual for unrecognized tax benefits.
Consequently, no interest or penalties have been accrued by the Company. The Company believes that no significant changes to the amount of
unrecognized tax benefits will occur within the next twelve months.
The Company is subject to taxation in the United States and in various state jurisdictions. The Company is no longer subject to U.S. examination
for years before 2011 by the federal taxing authority, and for years before 2010 by state taxing authorities.
11. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution employee benefit plan that permits its employees, subject to certain eligibility requirements, to
contribute up to 25% of their qualified compensation to the plan. The Company matches 100% of the employees’
contributions of the first 3% of
the employees’ annual qualified compensation, and 50% of the employees’ contributions of the next 2% of the employees’ annual qualified
compensation. The Company’s matching contribution immediately fully vests. The Company’s contributions to the plan for the years ended
December 31, 2014, December 25, 2013, and December 26, 2012 were $503,000, $447,000, and $396,000 respectively.
12. STOCK-BASED COMPENSATION
As of December 31, 2014, options to purchase 3,070,176 shares of common stock of the Company were outstanding. Included in the
December 31, 2014 amount are 2,067,727 options that are fully vested. The remaining options vest over time or upon the Company’s attaining
annual financial goals. However, the compensation committee of the board of directors, as administrator of the Company’s 2014 Omnibus
Equity
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