KURA SUSHI USA, INC. Income Taxes Disclosure

Note 12—Income Taxes

The Company had an effective tax rate of (10.1)%, (1.9)%, and 13.4% for the fiscal years ended August 31, 2025, August 31, 2024, and August 31, 2023, respectively. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate was as follows:

The Company recorded an income tax provision for the years ended August 31, 2025, 2024 and 2023 of $175 thousand, $167 thousand, and $233 thousand, respectively. The primary difference between the effective rate and the federal statutory tax rate relates to recognition of valuation allowance against deferred tax assets, employer tip credits, and non-deductible stock compensation.

The deferred income taxes reflect the tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

As of August 31, 2025, the Company has U.S. federal net operating loss (“NOL”) carryover of approximately $39.6 million, various state NOL carryover of approximately $22.5 million, and federal tax credit carryover of approximately $10.3 million. If not utilized, $36.9 million of the federal NOL can be carried forward indefinitely, and the remainder will begin to expire in the fiscal year ending August 31, 2036. The federal tax credit will begin to expire in the fiscal year ending August 31, 2032. Utilization of the Company’s NOL and federal tax credit carryover may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. The Company has not completed the Section 382 and 383 assessment of an ownership change as of August 31, 2025

The Company has not recorded any unrecognized tax benefits as of August 31, 2025. Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain positions. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized. The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended August 31, 2025, as well as significant deferred tax assets in excess of deferred tax liabilities. As a result, the Company determined that it is not more likely than not that it will generate sufficient future U.S. taxable income to realize its deferred tax assets and, therefore, recorded valuation allowances against the net deferred tax assets. The total amount of the valuation allowance was approximately $17.5 million. The net change for the valuation allowance was $1.9 million for the fiscal year ended August 31, 2025.

On July 4, 2025, the President signed into law, the reconciliation tax bill, commonly known as the "One Big Beautiful Bill Act" (OBBA). Notable corporate provisions include the restoration of 100% bonus depreciation; the creation of Section 174A, which reinstates expensing for domestic research and experimental (R&E) expenditures; modifications to Section 163(j) interest limitations; updates to the rules for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII); amendments to the rules for energy credits; and the expansion of Section 162(m) aggregation requirements. The Company does not expect the OBBA to have a material impact on the Company’s effective tax rate or income tax expense for the fiscal year ended August 31, 2025.