LEE ENTERPRISES, IncLEE
LEE ENTERPRISES, Inc Income Taxes Disclosure
INCOME TAXES
Income tax benefit consists of the following:
| (Thousands of Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
| Current Taxes: | |||||||||||||||||
| Federal | (9) | 2,430 | 4,528 | ||||||||||||||
| State | 20 | 488 | (336) | ||||||||||||||
| 11 | 2,918 | 4,192 | |||||||||||||||
| Deferred Taxes: | |||||||||||||||||
| Federal | (3,605) | (9,388) | (4,973) | ||||||||||||||
| State | (3,309) | (1,140) | 432 | ||||||||||||||
| (6,914) | (10,528) | (4,541) | |||||||||||||||
| Income tax benefit | (6,903) | (7,610) | (349) | ||||||||||||||
Income tax benefit related to operations differs from the amounts computed by applying the U.S. federal income tax rate to loss before income taxes. The reasons for these differences are as follows:
| (Percent of Loss Before Income Taxes) | 2025 | 2024 | 2023 | ||||||||||||||
| Computed “expected” income tax expense | 21.0 | 21.0 | 21.0 | ||||||||||||||
| State income tax benefit, net of federal tax benefit | 6.3 | 3.8 | (5.4) | ||||||||||||||
| Net income of associated companies | 1.3 | 2.3 | 31.2 | ||||||||||||||
| Resolution of tax matters | 0.2 | 1.8 | 69.7 | ||||||||||||||
| Remeasurement due to state rate changes | (0.7) | 2.5 | (84.0) | ||||||||||||||
| Non-deductible expenses | (3.1) | (3.6) | (28.5) | ||||||||||||||
| Valuation allowance | (7.4) | (2.4) | 28.8 | ||||||||||||||
| State net operating loss expiration | (4.6) | (3.0) | (12.8) | ||||||||||||||
| Recognition of basis differences | 3.5 | 1.6 | 7.5 | ||||||||||||||
| Other | (0.2) | 0.4 | (16.2) | ||||||||||||||
| 16.3 | 24.4 | 11.3 | |||||||||||||||
Net deferred income tax liabilities consist of the following components:
| (Thousands of Dollars) | September 28 2025 | September 29 2024 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Property and equipment | (3,468) | (5,327) | |||||||||
| Identified intangible assets | (13,065) | (15,097) | |||||||||
| ASC 842 - Leases DTL | (6,357) | (8,308) | |||||||||
| Other | (1,091) | (1,738) | |||||||||
| Investments | (29,144) | (31,150) | |||||||||
| (53,125) | (61,619) | ||||||||||
| Deferred income tax assets: | |||||||||||
| Pension and postretirement benefits | 1,460 | 3,839 | |||||||||
| Interest deduction limitation | 22,929 | 16,097 | |||||||||
| Operating loss carryforwards | 23,771 | 25,267 | |||||||||
| ASC 842 - Leases DTA | 6,818 | 9,306 | |||||||||
| Other | 5,337 | 5,208 | |||||||||
| 60,315 | 59,717 | ||||||||||
| Valuation allowance | (29,667) | (26,500) | |||||||||
| Net deferred income tax liabilities | (22,477) | (28,403) | |||||||||
Certain prior-period deferred income tax assets and liabilities have been reclassified to conform to the current-period presentation. These reclassifications did not impact the previously reported net deferred income tax liabilities or any financial statement balances.
A reconciliation of 2025 and 2024 changes in gross unrecognized tax benefits is as follows:
| (Thousands of Dollars) | 2025 | 2024 | |||||||||
| Balance, beginning of year | 14,171 | 14,914 | |||||||||
| Changes in tax positions for prior years | (385) | 216 | |||||||||
| Increases (decrease) in tax positions for the current year | 1,277 | 837 | |||||||||
| Lapse in statute of limitations | (901) | (1,796) | |||||||||
| Balance, end of year | 14,162 | 14,171 | |||||||||
Approximately $11.6 million and $11.4 million of the gross unrecognized tax benefit balances for 2025 and 2024, respectively, relate to state net operating losses which are netted against deferred taxes on our Consolidated Balance Sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $2.1 million at September 28, 2025. We do not expect that unrecognized tax benefits will fluctuate significantly in the next twelve months. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $0.4 million at September 28, 2025 and $0.5 million at September 29, 2024. There were no amounts provided for penalties at September 28, 2025 or September 29, 2024.
At September 28, 2025 and September 29, 2024, we had a deferred tax asset of $22.9 million and $16.1 million, respectively, related to disallowed interest expense. A portion of this deferred tax asset is subject to a valuation allowance as we do not expect to fully realize a future tax benefit.
The valuation allowance totaled $29.7 million and $26.5 million in 2025 and 2024, respectively. The valuation allowance is on certain state net operating losses and disallowed interest expense carryforwards.
We are currently undergoing a New York Franchise Tax audit that includes fiscal year periods 2019 through 2021. Certain of our state income tax returns for the year ended September 24, 2017 are open for examination. The Federal and remaining state returns are open beginning with the September 29, 2019 year.
At September 28, 2025, we have state tax benefits of approximately $41.6 million in net operating loss ("NOL") carryforwards. Of the NOL balance, $40.6 million expire between 2024 and 2044 and $1.0 million have an indefinite carryforward period. These NOL carryforwards result in a deferred income tax asset of $32.9 million at September 28, 2025, a portion of which is offset by a valuation allowance.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law, introducing significant changes to corporate income tax deductions. For fiscal year 2025, OBBBA did not have a material impact on our financial statements. We continue to evaluate the future impact of the OBBBA for those provision that were effective after fiscal year 2025.
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.