CAVA GROUP, INC.CAVA
CAVA GROUP, INC. Income Taxes Disclosure
INCOME TAXES
At December 29, 2024, the Company assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets (“DTAs”). A significant piece of objective positive evidence evaluated was the cumulative income earned over the three-year period ended December 29, 2024. Such objective evidence, in addition to forecasted future taxable income and available tax planning strategies that could be implemented, were determined to support that it is more likely than not the existing DTAs will be realized. On the basis of this evaluation, as of December 29, 2024, the valuation allowance against the DTAs of $83.7 million was fully released. As of December 28, 2025 management determined that no valuation allowance was required.
Disaggregation of pre-tax income and provision for (benefit from) income taxes consists of the following:
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Income before taxes | |||||||||||||||||
| U.S. | $ | 70,799 | $ | 59,910 | $ | 14,048 | |||||||||||
| Total income before taxes | $ | 70,799 | $ | 59,910 | $ | 14,048 | |||||||||||
| Provision for (benefit from) income taxes | |||||||||||||||||
| Current tax expense | |||||||||||||||||
| U.S. federal | $ | 20 | $ | — | $ | — | |||||||||||
| U.S. state and local | 934 | 1,207 | 718 | ||||||||||||||
| Total | 954 | 1,207 | 718 | ||||||||||||||
| Deferred tax expense (benefit) | |||||||||||||||||
| U.S. federal | 5,793 | (56,021) | 20 | ||||||||||||||
| U.S. state and local | 309 | (15,595) | 30 | ||||||||||||||
| Total deferred tax expense | 6,102 | (71,616) | 50 | ||||||||||||||
| Provision for (benefit from) income taxes | $ | 7,056 | $ | (70,409) | $ | 768 | |||||||||||
The provision for income taxes differs from the amount computed by applying the U.S. federal statutory income tax rate to income before taxes for the reasons set forth below:
| 2025 | |||||||||||
| (in thousands) | $ | % | |||||||||
| Income tax expense at federal statutory rate | $ | 14,868 | 21.0 | % | |||||||
| Nontaxable and nondeductible items, net | |||||||||||
| Equity-based compensation | (9,543) | (13.5) | % | ||||||||
| Other | 744 | 1.1 | % | ||||||||
State and local income taxes, net of federal effect1 | 987 | 1.4 | % | ||||||||
| Provision for income taxes | $ | 7,056 | 10.0 | % | |||||||
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1 State taxes in California and Texas made up greater than 50% of the tax effect in this category.
As previously disclosed for fiscal 2024 and fiscal 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
(in thousands) | 2024 | 2023 | |||||||||
Income tax expense at federal statutory rate | $ | 12,581 | $ | 2,950 | |||||||
State income tax expense | 5,931 | 996 | |||||||||
Decrease in valuation allowance | (83,662) | (4,699) | |||||||||
Deferred taxes | — | 1,032 | |||||||||
Equity-based compensation | (5,251) | (556) | |||||||||
Nondeductible executive compensation | 227 | 915 | |||||||||
Other permanent adjustments | (235) | 130 | |||||||||
(Benefit from) provision for income taxes | $ | (70,409) | $ | 768 | |||||||
As a result of the release of the valuation allowance in fiscal 2024, the Company recorded a deferred tax liability related to the federal tax impact of its state deferred tax assets, which resulted in an increase to income tax expense of $3.6 million in fiscal 2024 presented within state income tax expense in the table above. The effective income tax rate in fiscal 2025 and 2024 includes a permanent benefit associated with equity-based compensation, which impacts federal and state taxes.
The following table presents the Company’s deferred tax assets and liabilities:
| (in thousands) | December 28, 2025 | December 29, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 63,731 | $ | 52,797 | |||||||
| Operating lease liabilities | 120,373 | 97,358 | |||||||||
| Equity-based compensation | 1,660 | 1,226 | |||||||||
| Other | 5,368 | 5,705 | |||||||||
| Net deferred tax assets | 191,132 | 157,086 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease assets | (100,537) | (82,737) | |||||||||
| Property and equipment | (25,202) | (2,812) | |||||||||
| Net deferred tax liabilities | (125,739) | (85,549) | |||||||||
| Total net deferred tax assets | $ | 65,393 | $ | 71,537 | |||||||
Income taxes paid (net of refunds) were as follows:
| (in thousands) | 2025 | |||||||
| California | $ | 942 | ||||||
| Massachusetts | 156 | |||||||
| Texas | 310 | |||||||
| Other | 264 | |||||||
| Total U.S. state and local | $ | 1,672 | ||||||
The Company had available as of December 28, 2025, $270.5 million and $142.9 million of unused federal and state net operating loss carryforwards, respectively. Under the Tax Cuts and Jobs Act of 2017, net operating losses may be carried forward indefinitely. However, net operating losses arising in tax years that begin after December 31, 2017, are limited to 80% of the respective future year’s taxable income. In addition, net operating loss carryforwards may be limited in situations where there is a change in the Company’s ownership. The Company has performed an analysis to substantiate existing net operating loss carryforwards are available for use related to historical changes in the Company’s ownership. The Company’s federal net operating losses generated before December 31, 2017, have all been utilized as of December 29, 2024. State net operating losses expire over varying intervals in the future.
On July 4, 2025, the United States Congress enacted H.R.1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), introducing significant amendments to the U.S. tax legislation, including extensions and modifications to
provisions of the Tax Cuts and Jobs Act. The OBBBA contains multiple effective dates, with certain provisions applicable beginning in 2025 and others phased in over subsequent years. The increase in deferred tax liabilities related to property and equipment, as seen in the table above, is associated with the reinstatement of 100% bonus depreciation. The Company will continue to monitor future administrative guidance and regulatory developments that may clarify the application of the OBBBA’s provisions.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
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.