J.Jill, Inc. Income Taxes Disclosure
14. Income Taxes
The provision for income taxes for the Fiscal Years 2024, 2023, and 2022 consists of the following (in thousands):
|
|
For the Fiscal Year Ended |
|
|||||||||
|
|
February 1, 2025 |
|
|
February 3, 2024 |
|
|
January 28, 2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
$ |
12,668 |
|
|
$ |
9,148 |
|
|
$ |
14,562 |
|
State and local |
|
|
3,408 |
|
|
|
3,108 |
|
|
|
2,582 |
|
Total current |
|
|
16,076 |
|
|
|
12,256 |
|
|
|
17,144 |
|
Deferred tax (benefit) expense |
|
|
|
|
|
|
|
|
|
|||
U.S. Federal |
|
|
(1,502 |
) |
|
|
1,971 |
|
|
|
(985 |
) |
State and local |
|
|
(76 |
) |
|
|
(1,063 |
) |
|
|
340 |
|
Total deferred tax (benefit) expense |
|
|
(1,578 |
) |
|
|
908 |
|
|
|
(645 |
) |
Total income tax provision |
|
$ |
14,498 |
|
|
$ |
13,164 |
|
|
$ |
16,499 |
|
The effective tax rate for the fiscal year ended February 1, 2025 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes and the impact of executive compensation limitations.
A reconciliation of the federal statutory income tax rate of 21% to the Company’s effective tax rate is as follows for the periods presented:
|
|
For the Fiscal Year Ended |
|
|||||||||
|
|
February 1, 2025 |
|
|
February 3, 2024 |
|
|
January 28, 2023 |
|
|||
Federal statutory income tax rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
|
|
21.0 |
% |
State income taxes, net of federal tax effect |
|
|
4.9 |
% |
|
|
6.0 |
% |
|
|
6.1 |
% |
Disallowed interest |
|
|
— |
|
|
|
1.8 |
% |
|
|
— |
|
Disallowed officer compensation |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.1 |
% |
Valuation allowance |
|
|
— |
|
|
|
(2.7 |
)% |
|
|
(2.2 |
)% |
Equity-based compensation expense |
|
|
(1.5 |
)% |
|
|
(1.6 |
)% |
|
|
(0.3 |
)% |
Charitable contributions |
|
|
(0.2 |
)% |
|
|
(0.2 |
)% |
|
|
(0.2 |
)% |
Tax return to provision adjustments |
|
|
— |
|
|
|
0.1 |
% |
|
|
1.5 |
% |
Other |
|
|
0.2 |
% |
|
|
(0.2 |
)% |
|
|
0.1 |
% |
Effective tax rate |
|
|
26.9 |
% |
|
|
26.7 |
% |
|
|
28.1 |
% |
The components of deferred tax assets (liabilities) were as follows (in thousands):
|
|
|
|
|||||
|
|
February 1, 2025 |
|
|
February 3, 2024 |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
4,286 |
|
|
$ |
3,981 |
|
State net operating loss carryforward |
|
|
320 |
|
|
|
1,367 |
|
Start-up costs |
|
|
294 |
|
|
|
351 |
|
Original issue discount |
|
|
1,741 |
|
|
|
— |
|
Lease liabilities |
|
|
35,346 |
|
|
|
35,643 |
|
Total deferred tax assets, gross |
|
|
41,987 |
|
|
|
41,342 |
|
Deferred tax liabilities |
|
|
|
|
|
|
||
Inventory |
|
|
(750 |
) |
|
|
(714 |
) |
Lease assets |
|
|
(28,893 |
) |
|
|
(27,883 |
) |
Fixed assets |
|
|
(5,523 |
) |
|
|
(6,394 |
) |
Intangible assets |
|
|
(15,628 |
) |
|
|
(16,823 |
) |
Prepaid expenses |
|
|
(582 |
) |
|
|
(495 |
) |
Total deferred tax liabilities |
|
|
(51,376 |
) |
|
|
(52,309 |
) |
Net deferred tax liabilities |
|
$ |
(9,389 |
) |
|
$ |
(10,967 |
) |
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets on a quarterly basis. During the fiscal year ended February 3, 2024, the Company reassessed the valuation allowance noting the shift of positive evidence outweighing negative evidence, including continued strong historical profits since the fiscal year 2021 emergence from the COVID-19 pandemic and expectations regarding future profitability. After assessing both the positive evidence and negative evidence, management determined it was more likely than not that the Company will realize all of its deferred tax assets as of the fiscal year ended February 3, 2024.
As of February 1, 2025, the Company does not have a federal net operating loss carryforward. The Company has $0.3 million of state net operating loss carryforwards that would expire if unutilized by the tax year 2040. The Company does not have a federal business interest carryforward. The Company has a $0.1 million of state business interest carryforwards, available to offset future taxable income. This carryforward can be carried forward indefinitely for state tax purposes.
The following table summarizes the changes in the Company’s unrecognized income tax benefits for Fiscal Years 2024, 2023 and 2022 (in thousands):
|
|
For the Fiscal Year Ended |
|
|||||||||
|
|
February 1, 2025 |
|
|
February 3, 2024 |
|
|
January 28, 2023 |
|
|||
Balance at the beginning of the period |
|
$ |
127 |
|
|
$ |
425 |
|
|
$ |
399 |
|
(Decreases) Increases for tax positions related to prior periods |
|
|
— |
|
|
|
(298 |
) |
|
|
26 |
|
Balance at the end of the period |
|
$ |
127 |
|
|
$ |
127 |
|
|
$ |
425 |
|
The Company had gross unrecognized tax benefits of $0.1 million, $0.1 million and $0.4 million as of February 1, 2025, February 3, 2024 and January 28, 2023, respectively, recorded in Other liabilities on the consolidated balance sheets. The Company will recognize interest and penalties, if any, related to uncertain tax positions in Income tax expense. As of February 1, 2025, no significant amount of penalties or interest have been accrued. We expect that the remaining unrecognized income tax benefits will be released in the next 12 months.
For federal and state income tax purposes, the Company’s tax years remain open under statute for Fiscal Year 2017 to present.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 1, 2025 | Showing above |
| 2020 | Jun 15, 2020 | |
| 2019 | Apr 8, 2019 | |
| 2018 | Apr 13, 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.