Floor & Decor Holdings, Inc.FND
Floor & Decor Holdings, Inc. Income Taxes Disclosure
Income Taxes
The components of income tax expense are as follows:
| Fiscal Year Ended | |||||||||||||||||
in thousands | December 25, 2025 | December 26, 2024 | December 28, 2023 | ||||||||||||||
Current expense: | |||||||||||||||||
Federal | $ | 67,320 | $ | 40,764 | $ | 29,737 | |||||||||||
State | 11,250 | 8,574 | 12,092 | ||||||||||||||
| Total current expense | 78,570 | 49,338 | 41,829 | ||||||||||||||
| Deferred expense (benefit): | |||||||||||||||||
Federal | (18,160) | 1,024 | 24,792 | ||||||||||||||
State | (2,396) | (2,831) | (1,070) | ||||||||||||||
Total deferred (benefit) expense | (20,556) | (1,807) | 23,722 | ||||||||||||||
Income tax expense | $ | 58,014 | $ | 47,531 | $ | 65,551 | |||||||||||
The following is a summary of the differences in amounts and percentages between the federal statutory tax rate of 21% and the Company’s effective tax rate for each of the last three fiscal years:
Fiscal Year Ended | ||||||||||||||||||||||||||||||||||||||
| December 25, 2025 | December 26, 2024 | December 28, 2023 | ||||||||||||||||||||||||||||||||||||
dollars in thousands | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 55,999 | 21.0 | % | $ | 53,215 | 21.0 | % | $ | 65,421 | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) (2) | 6,995 | 2.6 | 4,538 | 1.8 | 8,824 | 2.8 | ||||||||||||||||||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||||||||||||||
Energy-related tax credits | (4,401) | (1.6) | (248) | (0.1) | (257) | (0.1) | ||||||||||||||||||||||||||||||||
Other tax credits | (1,736) | (0.7) | (2,029) | (0.8) | (1,762) | (0.6) | ||||||||||||||||||||||||||||||||
Nontaxable or nondeductible items: | ||||||||||||||||||||||||||||||||||||||
| Share-based payment awards | (1,433) | (0.5) | (10,769) | (4.2) | (8,748) | (2.8) | ||||||||||||||||||||||||||||||||
Other | 2,244 | 0.8 | 3,013 | 1.2 | 1,714 | 0.6 | ||||||||||||||||||||||||||||||||
Changes in unrecognized tax benefits | 471 | 0.2 | 810 | 0.3 | — | — | ||||||||||||||||||||||||||||||||
Other adjustments | (125) | — | (999) | (0.4) | 359 | 0.1 | ||||||||||||||||||||||||||||||||
| Effective tax rate | $ | 58,014 | 21.8 | % | $ | 47,531 | 18.8 | % | $ | 65,551 | 21.0 | % | ||||||||||||||||||||||||||
(1)For fiscal 2025, California, New Jersey, and New York contributed to the majority of the tax effect in this category. For fiscal 2024, California and Texas contributed to the majority of the tax effect in this category. For fiscal 2023, California, Georgia, and Illinois contributed to the majority of the tax effect in this category.
(2)Includes state excess tax benefits related to stock-based compensation awards for fiscal years 2025, 2024, and 2023 of $0.3 million, $2.1 million, and $1.8 million, respectively.
Cash paid for income taxes, net of refunds, consisted of the following:
| Fiscal Year Ended | |||||||||||||||||
in thousands | December 25, 2025 | December 26, 2024 | December 28, 2023 | ||||||||||||||
Federal | $ | 50,130 | $ | 33,100 | $ | 45,405 | |||||||||||
State: | |||||||||||||||||
California | 2,692 | 2,313 | 3,629 | ||||||||||||||
Other | 11,139 | 7,462 | 11,993 | ||||||||||||||
Total | $ | 63,961 | $ | 42,875 | $ | 61,027 | |||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and (liabilities) are presented below:
| in thousands | December 25, 2025 | December 26, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Lease liabilities | $ | 454,752 | $ | 375,909 | |||||||
| Accruals not currently deductible for tax purposes | 27,024 | 24,011 | |||||||||
| Inventories | 11,519 | 11,552 | |||||||||
| Stock-based compensation | 8,805 | 7,559 | |||||||||
Other intangibles | 2,539 | 8,292 | |||||||||
| Gift card liability | 2,286 | 1,682 | |||||||||
Other | 1,832 | 1,853 | |||||||||
| Total deferred tax assets | 508,757 | 430,858 | |||||||||
| Deferred tax liabilities: | |||||||||||
Right-of-use assets | (406,371) | (332,596) | |||||||||
| Fixed assets | (99,707) | (116,400) | |||||||||
| Intangible assets | (27,506) | (27,358) | |||||||||
| Other | (5,354) | (5,254) | |||||||||
| Total deferred tax liabilities | (538,938) | (481,608) | |||||||||
| Net deferred tax liabilities | $ | (30,181) | $ | (50,750) | |||||||
The Company utilized no tax-effected state net operating losses in fiscal years 2025 and 2024. As of December 25, 2025, approximately $0.8 million of tax-effected state net operating losses were available to reduce future income taxes. The state net operating losses expire in various amounts beginning in fiscal 2034.
Pursuant to provisions under the Inflation Reduction Act, the Company purchased transferable federal tax credits during fiscal 2025. These federal tax credits were purchased at negotiated discounts, resulting in an income tax benefit recorded during the fiscal year ended December 25, 2025. Receivables associated with the transferable federal tax credits are recorded as an adjustment to income taxes payable.
In assessing the realization of deferred tax assets, including net operating losses, management considered whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in prior carryback periods, future reversals of existing taxable temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards in making this assessment, and accordingly, has concluded that no valuation allowance is necessary as of December 25, 2025 or December 26, 2024.
The Company files income tax returns with the U.S. Federal government and various state jurisdictions. Prior tax years beginning in fiscal year 2022 remain open to examination by the Internal Revenue Service. Foreign, state, and local income tax returns are generally subject to examination for a period of three to five years after filing of the respective returns.
There was no unrecognized tax benefits activity in fiscal 2023. The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits for the periods presented:
| Fiscal Year Ended | |||||||||||
| in thousands | December 25, 2025 | December 26, 2024 | |||||||||
| Unrecognized tax benefits balance at beginning of fiscal year | $ | 810 | $ | — | |||||||
| Additions based on tax positions related to the current year | 471 | 334 | |||||||||
| Additions for tax positions of prior years | — | 476 | |||||||||
| Unrecognized tax benefits balance at end of fiscal year | $ | 1,281 | $ | 810 | |||||||
As of December 25, 2025 and December 26, 2024, there were unrecognized tax benefits of $1.3 million and $0.8 million, respectively, that, if recognized, would affect the Company’s effective tax rate. The Company’s policy is to classify interest and penalties related to unrecognized tax benefits in income tax expense. The Company did not recognize interest expense related to unrecognized tax benefits during fiscal years 2025, 2024, or 2023.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA contains numerous amendments to federal income tax provisions such as making key elements of the Tax Cuts and Jobs Act permanent, including 100% bonus depreciation and domestic research cost expensing. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in later years. There was no material impact to the Company’s fiscal 2025 effective tax rate or consolidated financial statements. We have realized a reduction in our fiscal 2025 cash tax payments due to the above mentioned provisions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Mar 5, 2018 | |
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.