Barnes & Noble Education, Inc.BNED
Barnes & Noble Education, Inc. Income Taxes Disclosure
Income Taxes
For Fiscal 2025 and Fiscal 2024, we had no material revenue or expense in jurisdictions outside the United States other than India.
Impact of U.S. Tax Reform
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted. We have analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold improvements, modifications to charitable contributions and net operating loss limitations (“NOLs”), modifications to the deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration. The most
significant impact of the legislation for the Company was an income tax benefit of $7,164 for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021. As of May 3, 2025, we recognized a current income tax receivable for NOL carrybacks in prepaid and other current assets on the Consolidated Balance Sheet. We received a $15,774 refund in Fiscal 2023 and a $7,621 refund in Fiscal 2024 and a final refund of $2,403 in Fiscal 2025.
The components of Income tax expense are as follows:
| 53 weeks ended | 52 weeks ended | |||||||||||||
| May 3, 2025 | April 27, 2024 | |||||||||||||
| Current: | As Restated | |||||||||||||
| Federal | $ | 3,484 | $ | — | ||||||||||
| State | 1,329 | 318 | ||||||||||||
| International | 272 | 417 | ||||||||||||
| Total Current | 5,085 | 735 | ||||||||||||
| Deferred: | ||||||||||||||
| Federal | (829) | 123 | ||||||||||||
| State | — | — | ||||||||||||
| International | — | — | ||||||||||||
| Total Deferred | (829) | 123 | ||||||||||||
Total | $ | 4,256 | $ | 858 | ||||||||||
Reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows:
| 53 weeks ended | 52 weeks ended | |||||||||||||
| May 3, 2025 | April 27, 2024 | |||||||||||||
As Restated | ||||||||||||||
Federal statutory income tax rate | 21.0 | % | 21.0 | % | ||||||||||
State income taxes, net of federal income tax benefit | (0.4) | 2.5 | ||||||||||||
| Permanent book / tax differences | (18.1) | (1.4) | ||||||||||||
Changes in valuation allowance | (8.9) | (23.2) | ||||||||||||
| Other, net | (0.5) | (0.1) | ||||||||||||
| Effective income tax rate | (6.9) | % | (1.2) | % | ||||||||||
The effective tax rate for the 53 weeks ended May 3, 2025 is lower than the prior year comparable period due to permanent differences related to the debt-to-equity conversion, attribute limitations due to IRC 382, and valuation allowance movement.
One percentage point on our Fiscal 2025 effective tax rate is approximately $616. The other permanent book to tax differences are principally comprised of a loss on the conversion of debt to equity, non-deductible officer's compensation, and non-deductible stock compensation.
We account for income taxes using the asset and liability method. Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards.
The significant components of our deferred taxes consisted of the following:
| As of | ||||||||||||||
| May 3, 2025 | April 27, 2024 | |||||||||||||
As Restated | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Estimated accrued liabilities | $ | 7,061 | $ | 3,279 | ||||||||||
| Inventory | 18,964 | 19,402 | ||||||||||||
| Stock-based compensation | 1,809 | 979 | ||||||||||||
| Operating lease liabilities | 43,582 | 52,070 | ||||||||||||
| Tax credits | 1,072 | 1,131 | ||||||||||||
| Goodwill | 6,395 | 7,329 | ||||||||||||
| Divestitures & Capital Losses | 2,796 | — | ||||||||||||
| Net operating losses | 65,404 | 81,714 | ||||||||||||
| Interest carryforwards | 14,889 | 14,897 | ||||||||||||
| Property and equipment | 2,514 | 795 | ||||||||||||
| Other | 1,398 | 4,071 | ||||||||||||
| Gross deferred tax assets | 165,884 | 185,667 | ||||||||||||
| Valuation allowance | (84,566) | (79,065) | ||||||||||||
| Net deferred tax assets | 81,318 | 106,602 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible asset amortization | (16,304) | (19,757) | ||||||||||||
| Operating lease right-of-use assets | (46,955) | (55,417) | ||||||||||||
| Deferred Financing Costs | (2,250) | — | ||||||||||||
| LIFO inventory valuation | (16,944) | (33,392) | ||||||||||||
| Gross deferred tax liabilities | (82,453) | (108,566) | ||||||||||||
| Net deferred tax liability | $ | (1,135) | $ | (1,964) | ||||||||||
As of May 3, 2025 and April 27, 2024, we had $0 of unrecognized tax benefits.
Our policy is to recognize interest and penalties related to income tax matters in income tax expense. As of both May 3, 2025 and April 27, 2024, we had accrued $0 for net interest and penalties.
In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. In evaluating our ability to utilize our deferred tax assets, we considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction-by-jurisdiction basis. As of May 3, 2025, we recorded a valuation allowance of $84,566 compared to $79,065 as of April 27, 2024, a net increase of $5,501 due to fluctuations in U.S. deferred tax assets and liabilities.
As of May 3, 2025, we had state NOL carryforwards of approximately $406,041, which will begin to expire in 2026, state tax credit carryforwards totaling $295 which will begin to expire in 2025, federal tax credit carryforward of $1,071 which will begin to expire in 2040 and federal NOLs of approximately $211,913, which have an indefinite carryforward period.
As of May 3, 2025, we recorded $229 of foreign withholding tax related to future repatriations of earnings from certain foreign subsidiaries.
We are subject to U.S. federal income tax, as well as income tax in jurisdictions of each state having an income tax. The tax years that remain subject to examination are primarily Fiscal 2018 and forward. Some earlier years remain open for a small minority of states.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change” (generally defined as a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-change net operating losses and certain other pre-change tax attributes to offset its post-change income and taxes may be limited. Similar rules may apply under state tax laws. As a result of the Rights Offering, Backstop Commitment, Private Investment, and Term Loan Debt Conversion completed on June 10, 2024, we may have experienced an ownership change as defined by Sections 382 and 383. The Company conducted a study to determine if an ownership change occurred. It was determined that an ownership change occurred under Section 382 and 383, and the corresponding annual limitations materially impact the utilization of our tax attributes including our $211,913 NOL carryforwards, $60,195 disallowed interest expense carryforwards, and $1,071 tax credit carryforwards as of May 3, 2025. The Company anticipates that $63,092 of these tax attributes will be made available during Fiscal 2026 and Fiscal 2027. The Company does not have any material uncertain tax positions requiring recognition in the financial statements as of May 3, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 23, 2025 | Showing above |
| 2024 | Jul 1, 2024 | |
| 2023 | Jul 31, 2023 | |
| 2022 | Jun 29, 2022 | |
| 2021 | Jun 30, 2021 | |
| 2020 | Jul 14, 2020 | |
| 2019 | Jun 25, 2019 | |
| 2018 | Jun 20, 2018 | |
| 2017 | Jul 12, 2017 | |
| 2016 | Jun 29, 2016 | |
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.