CHIPOTLE MEXICAN GRILL INCCMG
CHIPOTLE MEXICAN GRILL INC Income Taxes Disclosure
Income Taxes
Income before income taxes, classified by source of income, was as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 2,017,473 | $ | 2,031,759 | $ | 1,637,756 | |||||||||||
| Foreign | (7,954) | (21,529) | (17,250) | ||||||||||||||
| Income before income taxes | $ | 2,009,519 | $ | 2,010,230 | $ | 1,620,506 | |||||||||||
The components of the provision for income taxes were as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax: | |||||||||||||||||
| U.S. Federal | $ | 298,983 | $ | 412,943 | $ | 314,757 | |||||||||||
| U.S. State and Local | 94,210 | 104,478 | 85,355 | ||||||||||||||
| Foreign | 1,082 | 1,636 | 1,162 | ||||||||||||||
| 394,275 | 519,057 | 401,274 | |||||||||||||||
| Deferred tax: | |||||||||||||||||
| U.S. Federal | 72,237 | (32,751) | (7,992) | ||||||||||||||
| U.S. State and Local | 6,639 | (10,195) | (1,532) | ||||||||||||||
| Foreign | 607 | 9 | 19 | ||||||||||||||
| 79,483 | (42,937) | (9,505) | |||||||||||||||
| Provision for income taxes | $ | 473,758 | $ | 476,120 | $ | 391,769 | |||||||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Year ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Statutory U.S. federal income tax rate | $ | 421,999 | 21.0% | ||||||||
State and Local income tax, net of related federal income tax benefit(1) | 79,174 | 4.0 | |||||||||
| Foreign Tax Effects | 3,413 | 0.2 | |||||||||
| Effect of Changes in Tax Law or Rates Enacted in the Current Period | - | - | |||||||||
| Effect of Cross-Border Tax Laws | (1,096) | (0.1) | |||||||||
| Tax Credits | (23,466) | (1.2) | |||||||||
| Changes in Valuation Allowances | - | - | |||||||||
| Nontaxable or Nondeductible Items | 584 | - | |||||||||
| Changes in Unrecognized Tax Benefits | (418) | - | |||||||||
| Other Adjustments | (6,432) | (0.3) | |||||||||
| Effective income tax rate | $ | 473,758 | 23.6% | ||||||||
(1) State and Local taxes in California, New York state and city, New Jersey, and Illinois made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory U.S. federal income tax rate | 21.0% | 21.0% | |||||||||
| State and local income tax, net of related federal income tax benefit | 3.7 | 4.0 | |||||||||
| Federal tax credits | (0.9) | (1.0) | |||||||||
| Executive compensation disallowed | 0.5 | 0.8 | |||||||||
| Valuation allowance | 0.3 | 0.3 | |||||||||
| Uncertain tax position reserves | - | 0.4 | |||||||||
| Other | 0.2 | 0.2 | |||||||||
| Return to provision and other discrete items | (0.1) | (0.2) | |||||||||
| Equity compensation related adjustments | (1.0) | (1.3) | |||||||||
| Effective income tax rate | 23.7% | 24.2% | |||||||||
The effective tax rate for the year ended December 31, 2025, was lower than the effective tax rate for the year ended December 31, 2024, primarily due to increases in U.S. federal income tax credits and a decrease in nondeductible expenses, partially offset with a reduction in excess tax benefits related to option exercises and equity vesting.
The components of the deferred income tax assets and liabilities for continuing operations were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax liability: | |||||||||||
| Leasehold improvements, property and equipment, net | $ | 324,163 | $ | 262,692 | |||||||
| Goodwill and other assets | 1,768 | 1,753 | |||||||||
| Operating lease assets | 1,217,124 | 1,088,934 | |||||||||
| Total deferred income tax liability | 1,543,055 | 1,353,379 | |||||||||
| Deferred income tax asset: | |||||||||||
| Gift card liability | 15,906 | 19,087 | |||||||||
| Capitalized transaction costs | 323 | 323 | |||||||||
| Stock-based compensation and other employee benefits | 68,073 | 61,574 | |||||||||
| Foreign net operating loss carry-forwards | 43,148 | 35,215 | |||||||||
| State credits | 701 | 872 | |||||||||
| Operating lease liabilities | 1,293,631 | 1,159,788 | |||||||||
| Allowances, reserves and other | 25,249 | 26,105 | |||||||||
| Capitalized research costs | (80) | 29,122 | |||||||||
| Prepaid assets and other | 11,689 | 10,334 | |||||||||
| State net operating loss carry-forwards | 4,129 | 3,867 | |||||||||
| Valuation allowance | (45,388) | (39,116) | |||||||||
| Total deferred income tax asset | 1,417,381 | 1,307,171 | |||||||||
| Deferred income tax liabilities | $ | 125,674 | $ | 46,208 | |||||||
Gross foreign net operating losses (“NOLs”) were $205,074 and $165,085 as of December 31, 2025 and 2024, respectively. Our foreign NOLs can be carried forward indefinitely.
Gross state NOLs available across all jurisdictions in which we operate were $68,896 and $52,950 as of December 31, 2025 and 2024, respectively. Our state NOLs expire over varying intervals in the future.
We had valuation allowances against certain foreign deferred tax assets of $45,065 and $38,792 as of December 31, 2025 and 2024, respectively. The increase in the valuation allowances were primarily related to net operating losses of consolidated foreign subsidiaries.
Unrecognized Tax Benefits
A reconciliation of the unrecognized tax benefits was as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning of year | $ | 16,888 | $ | 16,488 | $ | 8,902 | |||||||||||
| Increase resulting from prior year tax positions | 3,155 | 3,737 | 7,561 | ||||||||||||||
| Decrease resulting from prior year tax positions | (56) | (3,748) | (295) | ||||||||||||||
| Increase resulting from current year tax positions | 462 | 916 | 783 | ||||||||||||||
| Settlements with taxing authorities | (7,286) | - | (6) | ||||||||||||||
| Lapsing of statutes of limitations | (3,035) | (505) | (457) | ||||||||||||||
| End of year | $ | 10,128 | $ | 16,888 | $ | 16,488 | |||||||||||
Interest expense related to uncertain tax positions is recognized in interest and other income, net on the consolidated statements of income and comprehensive income. Penalties related to uncertain tax positions are recognized in provision for income taxes on the consolidated statements of income and comprehensive income. For the years ended December 31, 2025, 2024 and 2023, we recognized $726, $1,441 and $1,541, respectively, in interest expense related to uncertain tax positions. These are gross amounts before any tax benefits and are included in other liabilities on the consolidated balance sheets. As of December 31, 2025 and 2024, we have accrued interest of $1,560 and $2,959, respectively.
For the majority of states where we have a significant presence, we are no longer subject to tax examinations by tax authorities for tax years before 2021.
Income Taxes Paid
Income taxes paid (net of refunds) are as follows:
| Year ended December 31, 2025 | |||||
| U.S. Federal | $ | 345,279 | |||
| State & Local | 77,045 | ||||
| Foreign | 1,157 | ||||
| Total | $ | 423,481 | |||
The income taxes paid for the years ended December 31, 2024, and 2023 were $532,862 and $400,229, respectively.
Enactment of H.R.1
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international), and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The legislation’s enactment did not materially impact our effective income tax rate or cash tax position for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 4, 2026 | Showing above |
| 2024 | Feb 5, 2025 | |
| 2023 | Feb 8, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 10, 2021 | |
| 2019 | Feb 5, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 8, 2018 | |
| 2016 | Feb 7, 2017 | |
| 2015 | Feb 5, 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.