Dutch Bros Inc.BROS
Dutch Bros Inc. Income Taxes Disclosure
NOTE 12 — Income Taxes
Our income before income taxes is domestic-sourced only, and was as follows for the periods presented:
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
Income before income taxes | $ | 135,623 | $ | 84,885 | $ | 16,919 | ||||||||||||||
Our income tax expense consisted of the following:
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
Current income taxes | ||||||||||||||||||||
| Federal | $ | 200 | $ | 396 | $ | 193 | ||||||||||||||
State and local | 530 | 2,653 | 844 | |||||||||||||||||
Total current income taxes | 730 | 3,049 | 1,037 | |||||||||||||||||
Deferred tax expense | ||||||||||||||||||||
| Federal | 13,391 | 8,520 | 1,605 | |||||||||||||||||
State and local | 4,227 | 6,866 | 4,325 | |||||||||||||||||
Total deferred income taxes | 17,618 | 15,386 | 5,930 | |||||||||||||||||
Income tax expense | $ | 18,348 | $ | 18,435 | $ | 6,967 | ||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
(dollars in thousands) | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | 28,481 | 21.0 | 17,826 | 21.0 | 3,553 | 21.0 | ||||||||||||||||||||||||||||||||
Domestic state and local income taxes, net of federal effect 1 | 4,749 | 3.5 | 9,497 | 11.2 | 4,245 | 25.1 | ||||||||||||||||||||||||||||||||
Domestic federal: | ||||||||||||||||||||||||||||||||||||||
Tax credits: | ||||||||||||||||||||||||||||||||||||||
| Tip credit | (6,415) | (4.7) | (4,258) | (5.0) | (2,040) | (12.1) | ||||||||||||||||||||||||||||||||
| Other | (243) | (0.2) | (149) | (0.2) | (138) | (0.8) | ||||||||||||||||||||||||||||||||
| Nontaxable and nondeductible items: | ||||||||||||||||||||||||||||||||||||||
| Income allocable to non-controlling interests not subject to tax | (8,108) | (6.0) | (6,950) | (8.2) | (1,944) | (11.5) | ||||||||||||||||||||||||||||||||
| Stock compensation - (windfall) shortfall | (3,267) | (2.4) | 257 | 0.3 | 644 | 3.8 | ||||||||||||||||||||||||||||||||
| Stock compensation - RSAs | — | — | 40 | — | 2,385 | 14.1 | ||||||||||||||||||||||||||||||||
| Section 162(m) compensation limitation | 1,461 | 1.1 | — | — | 122 | 0.7 | ||||||||||||||||||||||||||||||||
| TRA remeasurement | (1,001) | (0.7) | (892) | (1.0) | (556) | (3.3) | ||||||||||||||||||||||||||||||||
| Tip credit addback | 1,380 | 1.0 | 884 | 1.0 | 423 | 2.5 | ||||||||||||||||||||||||||||||||
| Other | 271 | 0.2 | 913 | 1.1 | 249 | 1.5 | ||||||||||||||||||||||||||||||||
Changes in valuation allowance | 1,247 | 0.9 | (157) | (0.2) | (57) | (0.3) | ||||||||||||||||||||||||||||||||
Impact of TRA adjustments | 359 | 0.2 | 965 | 1.2 | (15) | (0.1) | ||||||||||||||||||||||||||||||||
Other | (566) | (0.4) | 459 | 0.5 | 96 | 0.6 | ||||||||||||||||||||||||||||||||
Total | 18,348 | 13.5 | 18,435 | 21.7 | 6,967 | 41.2 | ||||||||||||||||||||||||||||||||
_________________
1 For the years ended December 31, 2025, 2024 and 2023, domestic state and local income taxes, net of federal effect primarily relate to the state of Oregon.
Our income taxes paid (net of refunds) consisted of the following:
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| U.S. federal | $ | 54 | $ | 370 | $ | 239 | ||||||||||||||
U.S. state and local total | 943 | 1,884 | 1,492 | |||||||||||||||||
| Total | $ | 996 | $ | 2,253 | $ | 1,731 | ||||||||||||||
Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Tennessee | * | $ | 1,276 | * | ||||||||||||||||
| Oregon | 545 | 263 | 773 | |||||||||||||||||
| Texas | 393 | 217 | 395 | |||||||||||||||||
_________________
* Jurisdiction did not exceed the 5% threshold in the period presented.
The components of our deferred tax assets are as follows1:
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Deferred tax assets | ||||||||||||||
Investment in Dutch Bros OpCo | $ | 833,598 | $ | 678,358 | ||||||||||
| Net operating loss carryforwards | 94,290 | 50,862 | ||||||||||||
| Credit carryforwards | 16,056 | 9,399 | ||||||||||||
| Charitable contribution carryforward | 3,030 | 1,505 | ||||||||||||
| Other | 1,825 | 2,865 | ||||||||||||
| Total deferred tax assets | 948,799 | 742,989 | ||||||||||||
| Less: valuation allowance | (2,228) | (863) | ||||||||||||
| Net deferred tax assets | $ | 946,571 | $ | 742,126 | ||||||||||
_________________
1 Certain prior year balances have been reclassified to conform with current year presentation.
We recognize deferred tax assets to the extent, based on available evidence, that it is more-likely-than-not that they will be realized. In making such a determination, we consider 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. For the years ended December 31, 2025 and 2024, we recorded a valuation allowance on our deferred tax assets, primarily related to charitable contributions, of which we do not expect to recognize benefit from in the foreseeable future. We have no deferred tax liabilities.
During 2025, in connection with our Tax Receivable Agreements, deferred tax assets associated with our investment in Dutch Bros OpCo increased $221.7 million due to the exchange of approximately 11.3 million units of our Class A common units for Class A common stock. In addition, during 2025 the TRA liability increased $202.7 million as a result of these exchanges. See NOTE 11 — Tax Receivable Agreements for additional details.
As of December 31, 2025, we had U.S. federal net operating losses of $386.9 million and tax credit carryforwards of approximately $16.1 million. Our federal net operating losses do not expire and tax credits will begin to expire in 2038, if not utilized. As of December 31, 2025, we had $248.4 million of state tax net operating losses and no state tax credits. Of the state tax net operating losses, $176.6 million will begin to expire in 2033 if not utilized and the remaining $71.8 million do not expire.Utilization of net operating losses, credit carryforwards, and certain deductions may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The tax benefits related to future utilization of federal and state net operating losses, tax credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examinations from various taxing authorities.
There were no interest and penalties accrued for the three years ended December 31, 2025. We have assessed our tax positions taken and concluded there are no significant uncertain tax positions. We have no unrecognized tax benefits as of December 31, 2025 or 2024, that, if recognized, would affect the amount of income tax expense reported.
We file returns with the Internal Revenue Service and multiple state jurisdictions, which are subject to examination by the taxing authorities for years 2019 and later. The earlier tax years are subject to examination due to the utilization of net operating losses in recent tax years. None of our federal or state income tax returns are currently under examination by federal or state taxing authorities.
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. This legislation was enacted during the third quarter of 2025, resulting in an increase to our valuation allowance related to the realizability of our charitable contributions carryforward. Other than the permanent extension of bonus depreciation provisions in the OBBBA, which will lower near term cash distributions to the members of Dutch Bros OpCo (including Dutch Bros Inc.), we do not expect the effects of this legislation to have a material impact on the Company’s financial results.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 11, 2022 | |
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.