CRACKER BARREL OLD COUNTRY STORE, INC Income Taxes Disclosure
12. | Income Taxes |
The components of the provision for income taxes (income tax benefit) for each of the three years were as follows:
| 2025 |
| 2024 |
| 2023 | ||||
Current: |
|
|
|
|
|
| |||
Federal | $ | 3,655 | $ | (10,448) | $ | 6,925 | |||
State |
| 2,727 |
| 247 |
| 3,573 | |||
Deferred: |
|
|
|
|
|
| |||
Federal |
| (14,275) |
| (3,526) |
| (4,902) | |||
State |
| (760) |
| (3,017) |
| (1,035) | |||
Total provision for income taxes (income tax benefit) | $ | (8,653) | $ | (16,744) | $ | 4,561 | |||
A reconciliation of the Company’s provision for income taxes (income tax benefit) and income taxes based on the statutory U.S. federal rate of 21.0% in 2025, 2024 and 2023 was as follows:
| 2025 |
| 2024 |
| 2023 | ||||
Provision computed at federal statutory income tax rate | $ | 7,922 | $ | 5,079 | $ | 21,758 | |||
State and local income taxes, net of federal benefit |
| 2,148 |
| 874 |
| 2,069 | |||
Employer tax credits for FICA taxes paid on employee tip income |
| (17,769) |
| (16,926) |
| (16,772) | |||
Other employer tax credits |
| (3,002) |
| (3,476) |
| (3,673) | |||
Tax audit settlement |
| (299) |
| (2,718) |
| — | |||
Carryback of federal tax credits | (1,040) | (1,545) | — | ||||||
Non-deductible executive compensation | 1,879 | 1,254 | 936 | ||||||
Share-based compensation | 599 | 548 | 338 | ||||||
Other-net |
| 909 |
| 166 |
| (95) | |||
Total provision for income taxes (income tax benefit) | $ | (8,653) | $ | (16,744) | $ | 4,561 | |||
The Company’s income tax benefit decreased in 2025 primarily due to the increase in income before income taxes and fewer favorable audit settlements as compared to 2024. The decrease in the Company’s provision for income taxes (income tax benefit) in 2024 as compared to 2023 is primarily due to the decrease in income before income taxes and favorable audit settlements in 2024.
H.R.1., also known as the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025. The OBBBA includes significant tax law changes with effective dates in 2025 and continuing through 2027. The provisions effective during 2025 did not have a material impact on the Company’s 2025 financial statements.
Significant components of the Company’s net deferred tax liability consisted of the following at:
| August 01, 2025 |
| August 02, 2024 | |||
Deferred tax assets: |
|
|
|
| ||
Compensation and employee benefits | $ | 7,054 | $ | 5,677 | ||
Accrued liabilities |
| 12,728 |
| 14,202 | ||
Operating lease liabilities |
| 173,396 |
| 181,094 | ||
Insurance reserves |
| 9,304 |
| 8,760 | ||
Inventory |
| 3,816 |
| 3,515 | ||
Deferred tax credits and carryforwards |
| 52,035 |
| 33,979 | ||
Other |
| 5,064 |
| 7,132 | ||
Deferred tax assets | $ | 263,397 | $ | 254,359 | ||
Deferred tax liabilities: |
|
|
|
| ||
Property and equipment | $ | 95,793 | $ | 97,014 | ||
Inventory |
| 6,502 |
| 6,217 | ||
Operating lease right-of-use asset |
| 201,118 |
| 211,826 | ||
Other |
| 8,575 |
| 7,014 | ||
Deferred tax liabilities |
| 311,988 |
| 322,071 | ||
Net deferred tax liability | $ | 48,591 | $ | 67,712 | ||
The Company has a deferred tax asset of $28,556 reflecting federal income tax credit carryforwards that expire in 2044. The Company has state income tax net operating loss carryforwards (“NOL”) of $110,534 and has recorded a deferred tax asset of $5,737 reflecting this benefit. These state NOLs generally expire in years beginning 2037 and after.
The Company believes that adequate amounts of tax, interest and penalties have been provided for potential tax uncertainties; these amounts are included in other long-term liabilities in the Consolidated Balance Sheets. As of August 01, 2025 and August 02, 2024, the Company’s gross liability for uncertain tax positions, exclusive of interest and penalties, was $6,703 and $7,404, respectively.
Summarized below is a tabular reconciliation of the beginning and ending balance of the Company’s total gross liability for uncertain tax positions exclusive of interest and penalties:
| August 01, 2025 |
| August 02, 2024 |
| July 28, 2023 | ||||
Balance at beginning of year | $ | 7,404 | $ | 9,675 | $ | 10,858 | |||
Tax positions related to the current year: |
| ||||||||
Additions | 470 |
| 276 |
| 710 | ||||
Reductions |
| — |
| — |
| — | |||
Tax positions related to the prior year: |
| ||||||||
Additions | 19 |
| 43 |
| 52 | ||||
Reductions |
| (40) |
| (674) |
| (298) | |||
Settlements |
| (580) |
| (1,433) |
| — | |||
Expiration of statute of limitations |
| (570) |
| (483) |
| (1,647) | |||
Balance at end of year | $ | 6,703 | $ | 7,404 | $ | 9,675 | |||
If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a tax benefit to the Company and impact the effective tax rate. The following table highlights the amount of uncertain tax positions, exclusive of interest and penalties, which, if recognized, would affect the effective tax rate for each of the three years:
| 2025 |
| 2024 |
| 2023 | ||||
Uncertain tax positions | $ | 5,296 | $ | 5,849 | $ | 7,644 | |||
The Company had $8,672, $7,913, and $7,896 in interest and penalties accrued as of August 01, 2025, August 02, 2024, and July 28, 2023, respectively.
The Company recognized accrued interest and penalties related to unrecognized tax benefits of $760, $17 and $764 in its provision for income taxes (income tax benefit) on August 01, 2025, August 02, 2024 and July 28, 2023, respectively.
In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. Based on the outcome of these examinations or as a result of the expiration of the statutes of limitations for specific taxing jurisdictions, it is reasonably possible that the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company’s financial statements at August 01, 2025 by approximately $300 to $1,200 within the next twelve months. At August 01, 2025, the Company was subject to income tax examinations for its U.S. federal income taxes after 2018 and for state and local income taxes generally after 2019.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 26, 2025 | Showing above |
| 2023 | Sep 26, 2023 | |
| 2022 | Sep 27, 2022 | |
| 2020 | Sep 25, 2020 | |
| 2019 | Sep 27, 2019 | |
| 2017 | Sep 22, 2017 | |
| 2016 | Sep 26, 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.