Aveanna Healthcare Holdings, Inc. Income Taxes Disclosure
11. INCOME TAXES
Pre-tax book income was derived from the following sources for the fiscal year ended January 3, 2026 (amounts in thousands):
|
For the fiscal year ended |
|
|
|
January 3, 2026 |
|
|
Pre-Tax Book Income |
|
|
|
U.S. Sources |
$ |
106,948 |
|
Non-U.S. Sources |
|
- |
|
Total |
$ |
106,948 |
|
Income taxes consisted of the following for the fiscal years ended January 3, 2026 and December 28, 2024 (amounts in thousands):
|
For the fiscal years ended |
|
||||
|
January 3, 2026 |
|
December 28, 2024 |
|
||
Current income tax expense: |
|
|
|
|
||
Federal |
$ |
20,831 |
|
$ |
12,097 |
|
State and local |
|
4,117 |
|
|
2,869 |
|
Foreign |
|
- |
|
|
- |
|
Total Current |
$ |
24,948 |
|
$ |
14,966 |
|
Deferred income tax (benefit) expense: |
|
|
|
|
||
Federal |
$ |
(122,692 |
) |
$ |
527 |
|
State and local |
|
(20,342 |
) |
|
508 |
|
Foreign |
|
- |
|
|
- |
|
Total Deferred |
$ |
(143,034 |
) |
$ |
1,035 |
|
Total income tax (benefit) expense |
$ |
(118,086 |
) |
$ |
16,001 |
|
A reconciliation of the difference between the federal statutory tax rate and the Company’s effective tax rate for income taxes for the fiscal years ended January 3, 2026 and December 28, 2024 is as follows (dollars in thousands):
|
For the fiscal year ended January 3, 2026 |
|
||||
|
Amount |
|
Percentage |
|
||
U.S. Federal statutory income tax rate |
$ |
(22,459 |
) |
|
(21.0 |
) |
State and local income taxes, net of federal income tax effect (1) |
|
17,161 |
|
|
16.0 |
|
Nontaxable or nondeductible items: |
|
|
|
|
||
Non-cash share-based payments |
|
(2,501 |
) |
|
(2.3 |
) |
Other permanent differences |
|
(505 |
) |
|
(0.5 |
) |
Changes in valuation allowances |
|
127,133 |
|
|
118.9 |
|
Federal tax credits: |
|
|
|
|
||
Research and development tax credits |
|
1,745 |
|
|
1.6 |
|
Other tax credits |
|
824 |
|
|
0.8 |
|
Changes in unrecognized tax benefits |
|
(2,373 |
) |
|
(2.2 |
) |
Other adjustments |
|
(939 |
) |
|
(0.9 |
) |
Total tax benefit and effective tax rate |
$ |
118,086 |
|
|
110.4 |
|
(1) The states of California and Pennsylvania comprised the majority (greater than 50%) of the state tax benefit.
|
For the fiscal year ended December 28, 2024 |
|
|
|
Percentage |
|
|
U.S. Federal statutory income tax rate |
|
(21.0 |
) |
State income taxes, net of federal tax benefits |
|
(65.5 |
) |
Other nondeductible expenses |
|
(19.2 |
) |
Uncertain tax positions |
|
(227.8 |
) |
Valuation allowance |
|
8.1 |
|
Tax credits |
|
35.5 |
|
Deferred tax adjustments |
|
(25.6 |
) |
Effective tax rate |
|
(315.5 |
) |
Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of deferred tax assets and liabilities are as follows as of January 3, 2026 and December 28, 2024 (amounts in thousands):
|
As of |
|
||||
|
January 3, 2026 |
|
December 28, 2024 |
|
||
Deferred tax assets: |
|
|
|
|
||
Estimated contractual adjustments |
$ |
27,519 |
|
$ |
23,697 |
|
NOL, federal and state |
|
24,909 |
|
|
18,557 |
|
Tax credits |
|
578 |
|
|
1,113 |
|
Payroll related accruals |
|
26,574 |
|
|
25,425 |
|
Intangible assets and goodwill |
|
57,752 |
|
|
74,636 |
|
Interest expense limitation |
|
87,138 |
|
|
81,608 |
|
Transaction costs |
|
3,483 |
|
|
3,219 |
|
Accrued expenses |
|
1,976 |
|
|
1,074 |
|
Interest rate derivatives |
|
814 |
|
|
- |
|
Lease liabilities |
|
11,285 |
|
|
14,168 |
|
Stock compensation |
|
11,517 |
|
|
12,512 |
|
Section 174 costs |
|
- |
|
|
3,122 |
|
Other |
|
1,092 |
|
|
1,002 |
|
Gross deferred tax assets |
|
254,637 |
|
|
260,133 |
|
Less: valuation allowance |
|
(104,159 |
) |
|
(242,962 |
) |
Net deferred tax assets |
|
150,478 |
|
|
17,171 |
|
Deferred tax (liabilities): |
|
|
|
|
||
Property and equipment |
|
(2 |
) |
|
(221 |
) |
Interest rate derivatives |
|
- |
|
|
(6,992 |
) |
Lease right of use assets |
|
(10,120 |
) |
|
(10,727 |
) |
Other |
|
(3,216 |
) |
|
(5,125 |
) |
Gross deferred tax (liabilities) |
|
(13,338 |
) |
|
(23,065 |
) |
Net deferred tax assets (liabilities) |
$ |
137,140 |
|
$ |
(5,894 |
) |
As of January 3, 2026, the Company had gross federal and state net operating loss (“NOL”) carryforwards of $33.2 million and $376.5 million, respectively. For those losses that have an expiration date, the carryforwards will expire at various dates from 2028 through 2044. For those losses incurred after 2017, there is no statutory time expiration for the federal and certain state NOLs. A valuation allowance was established for federal and state losses that the Company believes are not more likely than not to be realized in the near future.
Internal Revenue Code Sec. 163(j) limits the deduction for net interest expense that exceeds 30% of the taxpayer’s adjusted taxable income (“ATI”) for the years ended 2025 and 2024. Sec. 163(j) permits an indefinite carryforward of any disallowed business interest. As of January 3, 2026, the Company has $371.6 million of interest expense carryovers. The deferred tax asset associated with these interest expense carryovers of $87.1 million is mostly offset by a valuation allowance as the Company believes the majority of the benefit of this carryover is not more likely than not to be realized in the future.
Annually, the Company assesses the future realization of the tax benefit of its existing deferred tax assets and determines whether a valuation allowance is needed. Based on the Company’s assessment of positive and negative evidence, it is more likely than not that most of the deferred tax assets will be realized in the future. The 163(j) attribute, the acquired Thrive federal NOLs, and various separate Company state attributes continue to carry a valuation allowance as future realization is not more likely than not. As a result, the Company recorded a valuation allowance of $104.2 million against its deferred tax assets at January 3, 2026. The valuation allowance decreased by $138.8 million from the $243.0 million valuation allowance recorded as of December 28, 2024. The decrease is primarily related to the Company's assessment of available positive and negative evidence as of January 3, 2026. The following table summarizes changes in the valuation allowance as of January 3, 2026 and December 28, 2024 (amounts in thousands):
|
As of |
|
||||
|
January 3, 2026 |
|
December 28, 2024 |
|
||
Beginning of year balance |
$ |
242,962 |
|
$ |
244,865 |
|
Valuation allowance recorded through purchase accounting |
|
12,336 |
|
|
- |
|
Changes in valuation allowance |
|
(151,139 |
) |
|
(1,903 |
) |
End of year balance |
$ |
104,159 |
|
$ |
242,962 |
|
The Company is subject to U.S. federal and state income tax in multiple jurisdictions. With limited exceptions, years prior to the 2022 fiscal year are no longer open to U.S. federal, state, or local examinations by taxing authorities. The Company is not under any current income tax examinations by any federal, state or local taxing authorities.
Uncertain Tax Positions
As of January 3, 2026 and December 28, 2024, the total unrecognized tax benefits were $14.7 million and $13.5 million, respectively, and accrued interest and penalties were $1.7 million and $0.5 million, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax benefit or expense. If the Company were to prevail on all unrecognized tax benefits recorded, $16.4 million of tax benefit would impact the overall effective tax rate within the next 12 months. The following table, which excludes penalties and interest, summarizes changes in uncertain tax positions as of January 3, 2026 and December 28, 2024 (amounts in thousands):
|
For the fiscal years ended |
|
||||
|
January 3, 2026 |
|
December 28, 2024 |
|
||
Beginning of year balance |
$ |
13,498 |
|
$ |
1,691 |
|
Increase in prior period tax positions |
|
1,209 |
|
|
13,180 |
|
Lapse of limitations |
|
(19 |
) |
|
(1,373 |
) |
End of year balance |
$ |
14,688 |
|
$ |
13,498 |
|
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA” or “H.R.1”) was signed into law by the President of the United States. The OBBBA contains significant provisions impacting corporate taxation in the United States with multiple effective dates. Among the changes effective in 2025 are modifications to capitalization of domestic research and development costs, accelerated depreciation of fixed assets and other qualifying property, as well as limitations on deductions of interest expense. Changes effective in 2026 include, among others, modifications to certain international tax provisions. The Company has recorded the impacts of OBBBA in the consolidated financial statements for the fiscal year ended January 3, 2026. There was no material effect on the Company's income tax benefit or effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 19, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
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.