Lucky Strike Entertainment CorpLUCK
Lucky Strike Entertainment Corp Income Taxes Disclosure
Income Taxes
Total loss before income taxes consists of:
| Fiscal Year Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | July 2, 2023 | |||||||||||||||
| Loss before tax: | |||||||||||||||||
| U.S. | $ | 38,364 | $ | (115,505) | $ | (7,054) | |||||||||||
| Foreign | 3,119 | 3,952 | 4,859 | ||||||||||||||
| Total loss before tax | $ | 41,483 | $ | (111,553) | $ | (2,195) | |||||||||||
Income tax benefit consists of the following:
| Fiscal Year Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | July 2, 2023 | |||||||||||||||
| Current income tax provision: | |||||||||||||||||
| Federal | $ | — | $ | 369 | $ | (1,772) | |||||||||||
| State and local | 4,225 | 4,892 | 3,694 | ||||||||||||||
| Foreign | 1,531 | 1,106 | 313 | ||||||||||||||
| Total current provision | 5,756 | 6,367 | 2,235 | ||||||||||||||
| Deferred income tax provision: | |||||||||||||||||
| Federal | 42,402 | (23,156) | (67,871) | ||||||||||||||
| State and local | 3,581 | (11,554) | (18,007) | ||||||||||||||
| Foreign | (234) | 371 | (600) | ||||||||||||||
| Total deferred provision | 45,749 | (34,339) | (86,478) | ||||||||||||||
| Total income tax benefit | $ | 51,505 | $ | (27,972) | $ | (84,243) | |||||||||||
The provision for income taxes differs from the amount computed by applying the statutory rate to the loss before income taxes primarily due to the changes in the valuation allowance and state and local taxes
| Fiscal Year Ended | |||||||||||||||||
| June 29, 2025 | June 30, 2024 | July 2, 2023 | |||||||||||||||
| Federal statutory rate | $ | 8,695 | $ | (23,426) | $ | (459) | |||||||||||
| State and local tax net of federal benefit | 6,858 | (7,689) | 3,212 | ||||||||||||||
| Deferred tax asset valuation allowance | 56,236 | — | (135,061) | ||||||||||||||
| Business Combination and asset acquisition items, including earnouts | (21,312) | 5,643 | 17,924 | ||||||||||||||
| Compensation limited by section 162(m) of the Internal Revenue Code | 2,134 | 2,242 | 2,826 | ||||||||||||||
| Other Permanent Differences | 1,053 | 1,015 | — | ||||||||||||||
| Uncertain tax positions | — | — | (27) | ||||||||||||||
| Foreign tax rate difference | 261 | 324 | 369 | ||||||||||||||
| Tax credit impact | (3,148) | (2,879) | (7,708) | ||||||||||||||
| Write-off of NOL generally due to S382 limitations | — | — | 41,901 | ||||||||||||||
| NOL and S163(J) increase due to change in estimate | — | — | (8,221) | ||||||||||||||
| Other | 728 | (3,202) | 1,001 | ||||||||||||||
| Effective tax rate | $ | 51,505 | $ | (27,972) | $ | (84,243) | |||||||||||
For the fiscal year ended June 29, 2025, the Company’s effective tax rate was increased by disallowed expenses associated with the earnout expense, S162(m) limitations, state and foreign income tax expenses and other items. For the fiscal years ended June 29, 2025 and June 30, 2024, the effective tax rate was favorably impacted by the realization and availability of federal income tax credits totaling approximately 3,148 and 2,879, respectively. These credits were identified in the prior year as the Company developed an appropriate data retrieval process for the current and open tax years. For the fiscal year ended June 29, 2025, the Company’s effective tax rate was impacted by the $65,104 partial valuation allowance due to the Company’s review of all positive and negative evidence regarding the realization of a deferred tax asset related to section 163(j) limitation carryforward. For the fiscal year ended July 2, 2023, the Company’s effective tax rate was impacted by the $135,061 release of the valuation allowances due to the Company’s review of all positive and negative evidence regarding the realization of deferred tax assets.
As of June 29, 2025, the Company had a net consolidated income tax receivable of $1,686 reflected in other current assets and a current consolidated income tax payable of $1,412 reflected in other current liabilities. As of June 30, 2024, the Company had a net consolidated income tax receivable of $2,282 reflected in other current assets, a current consolidated income tax payable of $557 reflected in other current liabilities.
The tax effects of temporary differences and carryforwards that give rise to significant components of deferred income tax assets and liabilities consist of:
| June 29, 2025 | June 30, 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Reserves not currently deductible | $ | 26,296 | $ | 15,184 | |||||||
| Finance lease liability | 348,048 | 334,462 | |||||||||
| R&D Costs (Section 174) | 2,108 | 828 | |||||||||
| Investment in partnership | 39,137 | 38,279 | |||||||||
| Net operating loss, interest, and tax credit carryforwards | 109,352 | 94,296 | |||||||||
| Subtotal | 524,941 | 483,049 | |||||||||
| Less: Valuation allowance | 66,039 | 884 | |||||||||
| Total net deferred income tax assets | 458,902 | 482,165 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Property and equipment | 102,313 | 85,095 | |||||||||
| ROU assets | 285,883 | 282,501 | |||||||||
| Favorable and unfavorable leases | 82 | 136 | |||||||||
| Goodwill and intangibles | 7,139 | 6,774 | |||||||||
| Total deferred income tax liabilities | 395,417 | 374,506 | |||||||||
| Net deferred income tax asset (liabilities) | $ | 63,485 | $ | 107,659 | |||||||
As of June 29, 2025, the Company has U.S. tax credit carryforwards of $12,233, U.S. federal net operating loss carryforwards (NOLs) of $137,445, U.S. state NOLs carryforwards of $50,700, Foreign NOLs carryforwards of $1,781 and interest carryforward of $267,545. As of June 30, 2024, the Company has U.S. tax credit carryforwards of $9,084, federal NOLs of $175,882, U.S. state NOLs carryforwards of $55,583 and interest carryforward of $185,234. The majority of the tax credits were generated in tax years ended June 30, 2019 and thereafter with remaining credits generated in the July 1, 2007 and June 29, 2008 tax years. The credits have a 20-year federal carryover period and will begin to expire starting in fiscal year 2027. Certain NOL carryforwards will begin to expire in 2025. The interest carryforward and $41,148 of NOL carryforwards do not expire.
Realization of deferred tax assets associated with deductible temporary differences, net operating losses and other carryforwards is dependent on generating sufficient future taxable income. Under Sections 382 and 383 of the Code, the Company’s federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of the Company’s stock. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or group of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three year period. The Company’s ability to utilize certain net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes. Similar rules may apply under state laws. It is currently estimated that $23,057 of the Company’s NOLs are subject to limitation due to the changes in ownership that occurred in 2004. During 2023, the Company expensed $208,697 of tax losses that will expire unused due to the 2004 ownership change limitation, even if there is sufficient taxable income to absorb such NOLs. These losses were offset by valuation allowances in previous years. The Company has not experienced an ownership change, as defined under Sections 382 and 383, since July 2017.
The Company regularly evaluates the realization of our net deferred tax assets. During the year ended July 2, 2023, the Company released $135,061 of valuation allowances in several jurisdictions based on reviews of all positive and negative evidence. In particular, the Company has experienced additional positive evidence of recent improved profitability to reach a conclusion on a more likely than not basis that the deferred tax assets could be realized and that certain valuation allowances are no longer required. The valuation allowances were further reduced by a net of $2,660 due to the OCI impact on the implementation of FAS 842 and foreign exchange/other adjustments, respectively.
During the fiscal year ended June 29, 2025, the company recorded an increase to its valuation allowance of $65,104 related to a deferred tax asset arising from Section 163(j) interest expense limitation carryforwards. This adjustment reflects management’s assessment that, due to a change in operating structure resulting in increased indebtedness and current projections of future taxable income, the disallowed interest expense carryforward is expected to continue to grow. Accordingly, it is not more likely than not that the related deferred tax asset will be realized, and a valuation allowance has
been recorded. The remaining valuation allowance of $935 as of June 29, 2025 is attributed to certain state tax losses that are limited and federal tax credits nearing their expiration date.
A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:
| June 29, 2025 | June 30, 2024 | July 2, 2023 | |||||||||||||||
| Balance at beginning of year | $ | — | $ | — | $ | 27 | |||||||||||
| Additions for tax positions of prior years | — | — | — | ||||||||||||||
| Reductions for tax positions of prior years | — | — | (27) | ||||||||||||||
| Balance at end of year | $ | — | $ | — | $ | — | |||||||||||
As of June 29, 2025 and June 30, 2024, the Company had not recorded an income tax liability on certain undistributed earnings of its foreign subsidiaries. It is expected that these earnings will be permanently reinvested in the operations within the respective country. The Company has not calculated the deferred tax liability that would come due if the earnings were distributed to the U.S., which the Company believes that any deferred tax liability recognized would not be material.
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025. We are currently evaluating the impact of the bill to our consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 28, 2025 | Showing above |
| 2024 | Sep 5, 2024 | |
| 2023 | Sep 11, 2023 | |
| 2022 | Sep 15, 2022 | |
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.