Shake Shack 2016 Annual Report Download - page 96

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Table of Contents
A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:
2015
2014
2013
Expected U.S. federal income taxes at statutory rate (34%) $ 2,186
$ 945
$ 2,000
State and local income taxes, net of federal benefit 663
101
176
Foreign withholding taxes 433
561
188
Non-deductible expenses 653
—
—
Tax credits (141)
—
—
Non-controlling interest (490)
—
—
LLC flow-through structure —
(976)
(1,904)
Other —
31
—
Income tax expense $ 3,304
$ 662
$ 460
Our effective income tax rates for fiscal 2015 , 2014 and 2013 were 51.4% , 23.8% and 7.8% , respectively. The significant increase in both the amount of income
tax expense and our effective income tax rate from fiscal 2014 to fiscal 2015 is primarily due to the IPO and Organizational Transactions. In fiscal 2014, we were
only subject to certain LLC entity-level taxes and foreign withholding taxes, whereas in fiscal 2015 we were also subject to U.S. federal, state and local income
taxes on our allocable share of any taxable income or loss generated by SSE Holdings subsequent to the IPO and Organizational Transactions. Additionally, as the
non-recurring compensation expenses and other IPO-related expenses were incurred in the period prior to the Organizational Transactions, we are not entitled to
any tax benefits related to those expenses. This resulted in a high effective income tax rate when compared to the amount of our consolidated income before
income taxes for fiscal 2015 . The increase in our effective income tax rate from fiscal 2013 to fiscal 2014 was primarily due to increased foreign withholding taxes
resulting from increased licensing revenue.
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities are as follows:
December 30
2015
December 31
2014
Deferred tax assets:
Investment in partnership $ 154,649
$ —
Tax Receivable Agreement 69,513
—
Deferred rent 492
448
Deferred revenue 63
66
Stock-based compensation 218
—
Net operating loss carryforwards 334
—
Other assets 159
26
Total gross deferred tax assets 225,428
540
Valuation allowance (23,155)
—
Total deferred tax assets, net of valuation allowance 202,273
540
Deferred tax liabilities:
Property and equipment (316)
(379)
Total gross deferred tax liabilities (316)
(379)
Net deferred tax assets $ 201,957
$ 161
Shake Shack Inc. Form 10-K | 94