Dave & Buster's Entertainment, Inc.PLAY
Dave & Buster's Entertainment, Inc. Income Taxes Disclosure
Income Taxes
The effective tax rate for fiscal 2025 was 28.3%, compared to 16.5% for fiscal 2024. The effective tax rate increase for fiscal 2025 compared to fiscal 2024 was primarily driven by a significant shift in pre-tax book income. The Company had a pre-tax loss, thus certain tax attributes and permanent items have an increased impact on the effective tax rate, as they represent a larger proportion relative to a diminished income. Additionally, an increase in permanent nondeductible items and unfavorable state income tax effects during fiscal 2025 further contributed to the higher effective tax rate relative to the prior year.
In fiscal 2025, we adopted ASU 2023-09, as described further at Note 1, on a prospective basis. Disclosures for fiscal 2025 reflect the updated requirements of the standard, while disclosures for prior periods continue to be presented under the guidance in effect for those periods.
For fiscal 2025, the components of income before income taxes and the corresponding provision for (benefit from) income taxes, prepared in accordance with ASU 2023-09, are presented below:
| February 3, 2026 | |||||
| Income (loss) before income taxes | |||||
| United States | $ | (68.3) | |||
| Foreign | 0.4 | ||||
| Total income (loss) before income taxes | $ | (67.9) | |||
The following table sets forth our income tax provision (benefit from) for fiscal 2025, 2024 and 2023:
| February 3, 2026 | February 4, 2025 | February 4, 2024 | |||||||||||||||
| Current provision: | |||||||||||||||||
| Federal | $ | (15.6) | $ | 20.7 | $ | 8.3 | |||||||||||
| State and local | (1.1) | 11.4 | 9.4 | ||||||||||||||
| Foreign | 0.5 | 0.5 | 1.3 | ||||||||||||||
| Total current provision (benefit from) | (16.2) | 32.6 | 19.0 | ||||||||||||||
| Deferred provision: | |||||||||||||||||
| Federal | (3.3) | (16.9) | 16.2 | ||||||||||||||
| State and local | 0.3 | (3.9) | 2.5 | ||||||||||||||
| Foreign | — | (0.2) | (1.5) | ||||||||||||||
| Total deferred provision (benefit from) | (3.0) | (21.0) | 17.2 | ||||||||||||||
| Provision for (benefit from) income taxes | $ | (19.2) | $ | 11.6 | $ | 36.2 | |||||||||||
For the year ended February 3, 2026, the following reconciles the U.S federal statutory tax rate to the Company’s effective income tax rate for fiscal 2025, as required under ASU 2023-09:
| Amount | Percent | ||||||||||
| U.S. federal statutory rate | $ | (14.3) | 21.0 | % | |||||||
| Domestic federal: | |||||||||||
| Tax credits | |||||||||||
| Credit for FICA taxes paid on tips | (8.4) | 12.3 | % | ||||||||
| Work opportunity tax credit | (1.9) | 2.8 | % | ||||||||
| Other | (0.1) | 0.1 | % | ||||||||
| Non-taxable or non-deductible items | |||||||||||
| FICA taxes paid on tips subject to tax credit | 1.8 | (2.6) | % | ||||||||
| Non-deductible executive compensation | 1.6 | (2.3) | % | ||||||||
| Equity compensation | 1.0 | (1.5) | % | ||||||||
| Other | 1.0 | (1.2) | % | ||||||||
| Domestic state and local income taxes, net of federal benefit | 1.2 | (1.7) | % | ||||||||
| Foreign tax effects | 0.1 | (0.4) | % | ||||||||
| Changes in unrecognized tax benefits | (1.2) | 1.8 | % | ||||||||
| Total | $ | (19.2) | 28.3 | % | |||||||
The following table reconciles the effective tax rate to the federal income tax rate for fiscal 2024 and 2023:
| February 4, 2025 | February 4, 2024 | ||||||||||
| Federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| State and local income taxes, net of federal benefit | 5.9 | % | 4.8 | % | |||||||
| Permanent differences | 3.1 | % | 2.3 | % | |||||||
| Tax credits | (14.2) | % | (7.7) | % | |||||||
| Share-based compensation | (0.3) | % | (0.4) | % | |||||||
| Other | 1.0 | % | 2.2 | % | |||||||
| Effective tax rate | 16.5 | % | 22.2 | % | |||||||
Components of the deferred income tax liability, net consist of the following as of the periods indicated:
| February 3, 2026 | February 4, 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Deferred revenue | $ | 6.5 | $ | 13.9 | |||||||
| Long-term lease obligation | 431.9 | 434.0 | |||||||||
| Accrued liabilities | 4.1 | 3.5 | |||||||||
| Workers’ compensation and general liability insurance | 5.5 | 5.6 | |||||||||
| Share-based compensation | 8.2 | 7.8 | |||||||||
| Financing obligation | 88.8 | 68.0 | |||||||||
| Net operating loss carryovers | 10.0 | 3.0 | |||||||||
| Tax credit carryovers | 12.0 | 1.6 | |||||||||
| Excess business interest expense | 28.4 | 21.4 | |||||||||
| Other | 5.5 | 6.2 | |||||||||
| Subtotal | 600.9 | 565.0 | |||||||||
| Less: Valuation allowance | (1.8) | (1.6) | |||||||||
| Total deferred tax assets | $ | 599.1 | $ | 563.4 | |||||||
| Deferred tax liabilities: | |||||||||||
| Trademark/tradename | $ | 43.7 | $ | 44.0 | |||||||
| Property and equipment | 263.4 | 229.3 | |||||||||
| Right of use assets | 341.4 | 344.2 | |||||||||
| Other debt related items | 4.2 | 5.7 | |||||||||
| Other | 6.0 | 3.1 | |||||||||
| Total deferred tax liabilities | $ | 658.7 | $ | 626.3 | |||||||
| Deferred tax liability, net | $ | 59.6 | $ | 62.9 | |||||||
Income taxes paid, net of refunds, by jurisdiction, are summarized below in accordance with ASU 2023-09 disclosure requirements for the year ended February 3, 2026:
| February 3, 2026 | |||||
| U.S. federal | $ | 5.5 | |||
| U.S. state and local | |||||
| Florida | 1.3 | ||||
| Louisiana | 0.8 | ||||
| Pennsylvania | 0.7 | ||||
| Texas | 0.9 | ||||
| Other | 1.7 | ||||
| Total U.S. state and local | 5.4 | ||||
| Foreign | (0.1) | ||||
| Total | $ | 10.8 | |||
As of February 3, 2026, we had $34.2 of U.S. federal net operating loss carryforwards, which do not expire, are subject to an offset limitation of 80% of future taxable income in any given year, and $54.0 of state net operating loss carryforwards, which begin to expire in 2026, general business tax credits of $10.3, which will begin to expire in 2045, and foreign tax credit carryovers of $1.7 which will begin to expire in 2028.
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
| February 3, 2026 | February 4, 2025 | February 4, 2024 | |||||||||||||||
| Balance at beginning of year | $ | 7.2 | $ | 8.6 | $ | 1.9 | |||||||||||
| Additions for tax positions of prior years | 0.9 | 0.9 | 1.1 | ||||||||||||||
| Reductions for tax positions of prior years | (0.2) | (1.8) | — | ||||||||||||||
| Settlements with tax authorities | (1.7) | (0.5) | — | ||||||||||||||
| Additions for tax positions of current year | 0.2 | 0.6 | 6.1 | ||||||||||||||
| Other | (0.3) | (0.6) | (0.5) | ||||||||||||||
| Balance at year end | $ | 6.1 | $ | 7.2 | $ | 8.6 | |||||||||||
The February 3, 2026 balance of unrecognized tax benefits includes $0.7, that if recognized, would affect our effective tax rate. At February 3, 2026, and February 4, 2025, we had accrued interest and penalties of $1.4 and $1.0, respectively. The Company recorded accrued interest related to the unrecognized tax benefits and penalties as a component of the “Provision for (benefit from) income taxes” recognized in the Consolidated Statements of Comprehensive Income (Loss).
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the United States. The legislation includes the permanent extension of certain provisions from the Tax Cuts and Jobs Act, changes to international tax rules, and the restoration of favorable treatment for certain business tax provisions, most notably 100% bonus depreciation on qualified assets and interest expense deductibility, with various effective dates beginning in 2025. We have reflected the impact of the enacted provisions, primarily affecting deferred tax liability and income tax receivable balances, in our Consolidated Balance Sheet. The legislation did not have a material impact on our income tax expense or effective tax rate for the year. We continue to evaluate the broader effects of the legislation as further guidance is issued.
We file consolidated income tax returns with all our domestic subsidiaries, which are periodically audited by various federal, state and foreign jurisdictions. We are generally no longer subject to federal, state, or foreign income tax examinations for years prior to 2021.
The Company recorded excess tax expense (benefit) of $1.2, $(1.0), and $(0.8), in fiscal 2025, fiscal 2024 and fiscal 2023, respectively, to the “Provision for (benefit from) income taxes” in the Consolidated Statements of Comprehensive Income (Loss).Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Apr 7, 2025 | |
| 2020 | Apr 3, 2020 | |
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.