ARK RESTAURANTS CORPARKR
ARK RESTAURANTS CORP Income Taxes Disclosure
INCOME TAXES
On July 4, 2025, President Trump signed H.R. 1, the “One Big Beautiful Bill Act” (“OBBBA”) into law. The OBBBA makes permanent many of the tax provisions previously enacted as part of the 2017 Tax Cut and Jobs Act that were set to expire at the end of 2025. The OBBBA also includes (i) the restoration of immediate expensing for domestic research and development expenditures, (ii) the reinstatement of 100% bonus depreciation for qualified property and (iii) favorably modifying the Internal Revenue Code Section 163(j) interest limitation from tax adjusted EBIT to EBITDA. FASB Topic 740, Income Taxes, requires the tax effects of changes in tax laws or rates be recognized in the period in which the law is
enacted. The enactment of the OBBBA did not have a material impact on the Company’s effective tax rate, or deferred tax balances as of September 27, 2025.
On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP Loans as fully deductible for tax purposes. During the year ended September 28, 2024, the Company recorded income of $285,000 for financial reporting purposes related to the forgiveness of its PPP Loans which is not taxable.
The provision (benefit) for income taxes consists of the following:
| Year Ended | |||||||||||
| September 27, 2025 | September 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Current provision (benefit): | |||||||||||
| Federal | $ | 102 | $ | 85 | |||||||
| State and local | 62 | 161 | |||||||||
| 164 | 246 | ||||||||||
| Deferred provision (benefit): | |||||||||||
| Federal | 581 | (617) | |||||||||
| State and local | 4,579 | (444) | |||||||||
| 5,160 | (1,061) | ||||||||||
| $ | 5,324 | $ | (815) | ||||||||
The effective tax rate differs from the U.S. income tax rate as follows:
| Year Ended | |||||||||||
| September 27, 2025 | September 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Provision at federal statutory rate (21%) | $ | (806) | $ | (958) | |||||||
| State and local income taxes, net of tax benefits | (100) | 231 | |||||||||
| Gain on forgiveness of PPP Loans | — | (60) | |||||||||
| Tax credits | (801) | (943) | |||||||||
| Loss attributable to non-controlling interest | (484) | (32) | |||||||||
| Changes in tax rates | 167 | 5 | |||||||||
| Change in valuation allowance | 7,322 | 963 | |||||||||
| Other | 26 | (21) | |||||||||
| $ | 5,324 | $ | (815) | ||||||||
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| September 27, 2025 | September 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| State net operating loss carryforwards | $ | 4,598 | $ | 4,670 | |||||||
| Lease liabilities | 18,222 | 20,349 | |||||||||
| Deferred compensation | 239 | 257 | |||||||||
| Tax credits | 4,033 | 3,376 | |||||||||
| Partnership investments | 260 | ||||||||||
| Other | 228 | 392 | |||||||||
| Deferred tax assets, before valuation allowance | 27,580 | 29,044 | |||||||||
| Valuation allowance | (11,558) | (4,236) | |||||||||
| Deferred tax assets, net of valuation allowance | 16,022 | 24,808 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (16,032) | (19,636) | |||||||||
| Prepaid expenses | (350) | (373) | |||||||||
| Deferred tax liabilities | (16,382) | (20,009) | |||||||||
| Net deferred tax assets (liabilities) | $ | (360) | $ | 4,799 | |||||||
In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including reversal of existing taxable temporary differences, forecasts of future earnings, and the duration of statutory carryforward periods. A significant piece of objective negative evidence evaluated is the cumulative loss incurred over the three-year period ended September 27, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. Based on the weight of available evidence, the Company determined that its deferred tax assets were not realizable on a more-likely-than-not basis and that a full valuation allowance is required. Accordingly, the Company increased the valuation allowance by $7,322,000 for the year ended September 27, 2025.
As of September 27, 2025, the Company had General Business Credit carryforwards of approximately $4,033,000 which expire through fiscal 2045. In addition, as of September 27, 2025, the Company has New York State net operating loss carryforwards of approximately $27,471,000 and New York City net operating loss carryforwards of approximately $25,268,000 that expire in varying amounts through fiscal 2041.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits excluding interest and penalties is as follows:
| September 27, 2025 | September 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Balance at beginning of year | $ | 210 | $ | 185 | |||||||
| Additions based on tax positions taken in current and prior years | (24) | 25 | |||||||||
| Decreases based on tax positions taken in prior years | — | — | |||||||||
| Balance at end of year | $ | 186 | $ | 210 | |||||||
The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate. However, if recognized, the entire amount of unrecognized tax benefit would attract a valuation allowance, thereby offsetting the favorable impact to the annual effective tax rate. For the years ended September 27, 2025 and September 28, 2024, there are no amounts accrued for the payment of interest and penalties. The Company does not expect a significant change to its unrecognized tax benefits within the next 12 months.
The Company files tax returns in the U.S. and various state and local jurisdictions with varying statutes of limitations. The 2022 through 2025 fiscal years remain subject to examination by the Internal Revenue Service and most state and local tax authorities.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 18, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Dec 21, 2023 | |
| 2022 | Dec 20, 2022 | |
| 2021 | Dec 21, 2021 | |
| 2020 | Dec 22, 2020 | |
| 2019 | Dec 17, 2019 | |
| 2018 | Dec 20, 2018 | |
| 2017 | Dec 29, 2017 | |
| 2016 | Dec 30, 2016 | |
| 2015 | Dec 30, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.