Black Rock Coffee Bar, Inc.BRCB
Black Rock Coffee Bar, Inc. Income Taxes Disclosure
Income Taxes and Tax Receivable Agreement
Overview of Income Taxes
Black Rock Coffee Bar, Inc. is a Subchapter C corporation and is subject to federal and state income taxes. Black Rock Coffee Bar, Inc.'s sole material asset is its ownership interest in Black Rock OpCo, which is a limited liability company that is treated as a partnership for U.S. federal and certain state and local income tax purposes. Black Rock OpCo's net taxable income and related tax credits, if any, are passed through to its members and included in the members' tax returns. The income tax burden on the earnings taxed to the noncontrolling interest holders is not reported by the Company in its consolidated financial statements under U.S. GAAP.
Provision for Income Taxes
Components of income tax expense are as follows:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current tax provision | |||||||||||||||||
| Federal | $ | (12) | $ | — | $ | — | |||||||||||
| State | 293 | 270 | 357 | ||||||||||||||
| Total current tax provision | 281 | 270 | 357 | ||||||||||||||
| Deferred tax expense (benefit) | |||||||||||||||||
| Federal | $ | (77) | $ | — | $ | — | |||||||||||
| State | 271 | — | — | ||||||||||||||
| Total deferred tax provision | 194 | — | — | ||||||||||||||
| Income tax expense | $ | 475 | $ | 270 | $ | 357 | |||||||||||
Our effective income tax rate differs from the U.S. federal statutory income tax rate as itemized below:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Effect of flow-through entity | (20.3) | (21.0) | (21.0) | ||||||||||||||
| Income allocable to noncontrolling interests not subject to tax | (0.8) | — | — | ||||||||||||||
| State and local income taxes, net of federal benefit | (2.3) | — | — | ||||||||||||||
| Tax credits | 0.7 | — | — | ||||||||||||||
| TRA Adjustments | 0.4 | — | — | ||||||||||||||
| Other | (1.7) | (3.9) | (4.3) | ||||||||||||||
| Effective income tax rate | (3.0) | % | (3.9) | % | (4.3) | % | |||||||||||
Our effective tax rate for the years ended December 31, 2025, 2024, and 2023, differs from the U.S. federal statutory rate of 21% due primarily to the effect of the flow-through entity which the taxable income or loss is allocated to the members.
The components of our deferred tax assets are as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Investment in Black Rock OpCo | $ | 51,204 | $ | — | |||||||
| Net operating loss carryforwards | 1,455 | — | |||||||||
| Credit carryforwards | 103 | — | |||||||||
| Charitable contribution carryforward | 2 | — | |||||||||
| Total deferred tax assets | 52,764 | — | |||||||||
| Less: valuation allowance | — | — | |||||||||
| Net deferred tax assets | $ | 52,764 | $ | — | |||||||
The deferred tax assets are due to the tax effects of temporary differences in the book basis as compared to the tax basis of Black Rock Coffee Bar, Inc.'s investment in Black Rock OpCo as a result of Black Rock Coffee Bar, Inc.'s investment in Black Rock OpCo. The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. As of December 31, 2025, the Company concluded, based on the evaluation of all available positive and negative evidence, that all of its deferred tax assets are more likely than not to be realized.
As each of the Continuing Equity Owners elects to convert their LLC Units into Class A common stock, Black Rock Coffee Bar, Inc. will assume their aggregate historical tax basis, which will create a net tax benefit for the Company. The Company will only recognize a deferred tax asset for financial reporting purposes when it is more-likely-than-not that the tax benefit will be realized.
As of December 31, 2025, we had U.S. federal net operating losses of approximately $6.4 million which do not expire.
We file returns with the Internal Revenue Service and multiple state jurisdictions, which are subject to examination by the taxing authorities for years 2022 and later.
On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act (OBBBA) was enacted in the United States. The OBBBA includes several significant changes in the U.S. tax law, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for specific business provisions. Other than the permanent extension of bonus depreciation provisions in the OBBBA, which will lower near term taxable income and cash distributions to the members of Black Rock OpCo (including Black Rock Coffee Bar Inc.), we do not expect the effects of this legislation to have a material impact on the Company’s financial results.
Tax Receivable Agreement
In connection with Transactions, the Company entered into a TRA with Black Rock OpCo and Continuing Equity Owners that provides for the payment by Black Rock Coffee Bar, Inc. to the Continuing Equity Owners of 85% of the amount of tax benefits, if any, that Black Rock Coffee Bar, Inc. realizes (or in some circumstances is deemed to realize) related to the tax basis adjustments.
As of December 31, 2025, the Company had a liability of approximately $38.9 million related to its projected obligations under the TRA and is classified as non-current on the consolidated balance sheets based on the expected date of payment.
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.