Savers Value Village, Inc.SVV
Savers Value Village, Inc. Income Taxes Disclosure
Income Taxes
Income before income taxes consisted of the following:
| Fiscal Year | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. operations | $ | 7,036 | $ | 32,767 | $ | (2,940) | |||||||||||
| Foreign operations | 30,169 | 16,667 | 50,019 | ||||||||||||||
| Income before income taxes | $ | 37,205 | $ | 49,434 | $ | 47,079 | |||||||||||
Components of income tax expense (benefit) are summarized as follows:
| Fiscal Year | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| U.S. - federal | $ | (3,042) | $ | 21,749 | $ | 8,280 | |||||||||||
| U.S. - state | 404 | 5,579 | 6,232 | ||||||||||||||
| Foreign | 9,511 | 24,360 | 14,838 | ||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. - federal | 5,600 | (18,733) | (19,480) | ||||||||||||||
| U.S. - state | 2,182 | (4,476) | (13,156) | ||||||||||||||
| Foreign | (89) | (8,075) | (2,750) | ||||||||||||||
| Income tax expense (benefit) | $ | 14,566 | $ | 20,404 | $ | (6,036) | |||||||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
Fiscal Year 2025 | |||||||||||
| (in thousands) | Amount | Percent | |||||||||
| U.S. federal statutory income tax rate | $ | 7,813 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 2,043 | 5.5 | |||||||||
| Nontaxable or nondeductible items, net: | |||||||||||
| Section 162(m) limitation | 3,604 | 9.7 | |||||||||
| Other | 520 | 1.4 | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Other | (50) | (0.1) | |||||||||
| Tax credits: | |||||||||||
| Foreign tax credit | (1,675) | (4.5) | |||||||||
| Work opportunity tax credit | (683) | (1.8) | |||||||||
| Foreign tax effects: | |||||||||||
| Canada | |||||||||||
| Statutory tax rate difference between Canada and United States | (2,233) | (6.0) | |||||||||
| Provincial taxes | 4,589 | 12.3 | |||||||||
| Rate difference on foreign capital gain/loss | (1,568) | (4.2) | |||||||||
| Stock-based compensation | 478 | 1.3 | |||||||||
| Withholding taxes | 1,705 | 4.6 | |||||||||
| Changes in valuation allowances | (1,568) | (4.2) | |||||||||
| Other | 134 | 0.3 | |||||||||
| Australia | |||||||||||
| Statutory tax rate difference between Australia and United States | (635) | (1.7) | |||||||||
| Changes in valuation allowances | 1,872 | 5.0 | |||||||||
| Other | 313 | 0.8 | |||||||||
| Changes in unrecognized tax benefits | (93) | (0.2) | |||||||||
| Effective tax rate | $ | 14,566 | 39.2 | % | |||||||
(1)The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Maryland, Massachusetts and Minnesota.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% U.S. federal income tax rate to income before income taxes prior to the adoption of ASU 2023-09 is as follows:
| Fiscal Year | |||||||||||
| (in thousands) | 2024 | 2023 | |||||||||
| Tax expense at statutory rate | $ | 10,381 | $ | 9,887 | |||||||
| Increase (decrease) in income taxes resulting from: | |||||||||||
| Change in valuation allowance | 7,348 | (2,996) | |||||||||
| Section 162(m) limitation | 6,648 | 11,229 | |||||||||
| Foreign rate differential | 3,720 | 2,623 | |||||||||
| Withholding taxes | 1,619 | 2,279 | |||||||||
| State taxes net of federal benefit | 871 | 4,519 | |||||||||
Tax impact of restructuring(1) | — | (31,340) | |||||||||
| Impact of foreign currency translations | (619) | (1) | |||||||||
| Change in tax rate | (878) | 4 | |||||||||
| Stock-based compensation | (1,130) | 1,590 | |||||||||
GILTI / FDII(2) | (1,493) | (1,603) | |||||||||
| Change in uncertain tax positions | (1,681) | — | |||||||||
| Prior year true-up | (2,236) | 4,205 | |||||||||
Tax credits | (2,492) | (3,741) | |||||||||
| Other | 346 | (2,691) | |||||||||
| Income tax expense (benefit) | $ | 20,404 | $ | (6,036) | |||||||
(1)In October 2023 the Company underwent an internal legal entity restructuring.
(2)GILTI and FDII refer to Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income, respectively.
The One Big Beautiful Bill Act (“OB3”) was enacted on July 4, 2025, which includes wide-ranging tax reforms for businesses. OB3 extended and modified certain provisions of the Tax Cuts & Jobs Act (TCJA) and made certain key elements permanent, including 100% bonus depreciation, immediate expensing of domestic research costs and the deductibility of business interest expense. The Company’s consolidated financial statements for fiscal 2025 reflect adjustments related to OB3. While the enacted legislation did not have a material impact on the Company’s effective tax rate for the year ended January 3, 2026, it resulted in a favorable change in the timing of cash taxes due to certain accelerated deductions. The Company will continue to assess the impact of OB3 provisions that become effective in future years and monitor potential outcomes based on its facts and circumstances each upcoming year.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows for the consolidated taxable entities at January 3, 2026 and December 28, 2024:
| (in thousands) | January 3, 2026 | December 28, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Lease liability | $ | 178,838 | $ | 147,676 | |||||||
| Deferred payroll | 23,277 | 14,148 | |||||||||
| Deferred interest | 15,784 | 20,366 | |||||||||
| Sec. 267 deferred basis | 8,721 | 8,466 | |||||||||
| Insurance reserves | 6,177 | 5,141 | |||||||||
| Realized loss on account of capital | 5,588 | 1,474 | |||||||||
| Unrealized foreign exchange loss | 3,606 | 8,940 | |||||||||
| Net operating loss carryforwards | 2,341 | 1,281 | |||||||||
| Partnership tax deferral | — | 4,601 | |||||||||
| Capitalized research and development | — | 4,413 | |||||||||
| Other | 6,124 | 4,956 | |||||||||
| Deferred tax assets, exclusive of valuation allowance | 250,456 | 221,462 | |||||||||
| Less: valuation allowance | 11,159 | 10,263 | |||||||||
| Deferred tax assets, net of valuation allowance | 239,297 | 211,199 | |||||||||
| Deferred tax liabilities: | |||||||||||
| ROU lease asset | 168,555 | 142,245 | |||||||||
| Trade names and trademarks | 30,119 | 28,556 | |||||||||
| Property and equipment depreciation | 22,726 | 17,197 | |||||||||
| Charity licensing agreements | 9,140 | 10,490 | |||||||||
| Partnership tax deferral | 3,244 | — | |||||||||
| Inventory | 3,210 | 3,397 | |||||||||
| Leasehold interests | 1,925 | 2,386 | |||||||||
| Unrealized foreign exchange gain | 269 | 113 | |||||||||
| Other | 3,628 | 3,014 | |||||||||
| Deferred tax liabilities | 242,816 | 207,398 | |||||||||
| Deferred tax (liabilities) assets, net | $ | (3,519) | $ | 3,801 | |||||||
Section 382 of the Internal Revenue Code and similar state regulations, contain provisions that may limit certain tax attributes available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership within the meaning of Section 382.
The Company maintains a valuation allowance of $0.1 million, $5.4 million and $5.7 million related to its U.S. state, Canadian and Australian operations, respectively. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts that are more-likely-than-not expected to be realized. Management evaluates and weighs all available positive and negative evidence such as historic results, projected future taxable income, future reversals of existing deferred tax liabilities, as well as prudent and feasible tax-planning strategies. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that the Company will realize the net benefits of its deferred tax assets, other than the deferred tax assets related to certain U.S. state net operating loss carryforwards, unrealized foreign exchange losses in Canada and deferred tax assets in Australia for which a valuation allowance has been established due to uncertainties relating to their realization.
As of January 3, 2026 and December 28, 2024, the Company had not recognized a deferred tax liability on the excess of the amount for financial reporting over the tax basis in the stock of certain foreign subsidiaries that is essentially permanent in duration. This amount becomes taxable upon a repatriation of assets from the subsidiaries or a disposal of the subsidiaries. It is not practicable to determine the amount of the related unrecognized deferred income tax liability.
As of January 3, 2026, the Company had the following net operating loss and income tax credit carryforwards:
| Fiscal Year 2025 | |||||||||||
| (in thousands) | Amount | Expires in | |||||||||
| Net operating loss carryforwards: | |||||||||||
| U.S. State | $ | 9,460 | 2028 - 2041 | ||||||||
| U.S. State | $ | 15 | Indefinite | ||||||||
| Non-U.S | $ | 5,616 | Indefinite | ||||||||
| Income tax credit carryforwards: | |||||||||||
| U.S. federal | $ | 275 | 2032 | ||||||||
As of January 3, 2026 and December 28, 2024, the Company did not have U.S. federal net operating loss carryforwards.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
| Fiscal Year | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning gross unrecognized tax benefits | $ | 231 | $ | 1,912 | $ | 1,912 | |||||||||||
| Increase related to prior year tax position | — | 138 | — | ||||||||||||||
| Decrease related to prior year tax position | (93) | (1,819) | — | ||||||||||||||
| Ending gross unrecognized tax benefits | $ | 138 | $ | 231 | $ | 1,912 | |||||||||||
As of January 3, 2026, the Company had $0.1 million of unrecognized tax benefits that, if recognized, would favorably affect our effective tax rate in the future.
In the normal course of business, the Company is subject to examination by taxing authorities in the countries in which it operates. As of January 3, 2026 the operations for tax years 2022 to 2025 remain subject to examination in the U.S. federal jurisdiction, and the operations for tax years 2021 to 2025 remain subject to examination in Canada, Australia, and most U.S. state jurisdictions. Although the outcome of tax audits is always uncertain, the Company has assessed the probable outcomes and potential exposure and believes that it has provided adequate amounts of tax, interest and penalties for any adjustments that may arise from these open tax years. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense (benefit) in the Consolidated Statements of Operations and Comprehensive Income.
The Organization for Economic Cooperation and Development (OECD) proposed model rules to ensure a minimal level of taxation (commonly referred to as Pillar II) and the European Union member states have agreed to implement Pillar II’s proposed global corporate minimum tax rate of 15%. We considered the applicable tax law changes from Pillar II implementation in the relevant countries in which we operate, and determined that there is no material impact to our tax provision for fiscal 2025. We will continue to evaluate the impact of these tax law changes in future reporting periods.
The amounts of cash income taxes paid, net of refunds received, by the Company were as follows:
Fiscal Year | |||||
| (in thousands) | 2025 | ||||
| U.S. Federal | $ | 15,800 | |||
| U.S. States | 2,438 | ||||
| Foreign: | |||||
| Canadian federal | 10,744 | ||||
| Canadian provincial | 6,193 | ||||
| Other foreign jurisdiction | 67 | ||||
| Total income taxes paid, net | $ | 35,242 | |||
The amount of cash income taxes paid, net of refunds received, by the Company during the years ended December 28, 2024 and December 30, 2023 was $48.2 million and $22.5 million, respectively.
As of January 3, 2026, the Company had a $28.7 million balance in prepaid income taxes, which is classified in prepaid expenses and other current assets in the Consolidated Balance Sheets. The Company’s prepaid income tax balance increased significantly compared to the prior year primarily as a result of the aforementioned new tax legislation enacted in July 2025. Prior to the enactment of the legislation, the Company made estimated income tax payments based on tax laws then in effect. The new legislation introduced favorable timing‑related deductions for tax purposes, which reduced the Company’s estimated current‑year taxable income and overall tax liabilities in the U.S. As a result, the estimated tax payments made under the pre‑new law exceeded the revised estimated tax obligation under the new law, giving rise to an overpayment that is reflected as prepaid income taxes. The balance represents amounts expected to be refunded or applied against future tax liabilities and is based on the Company’s preliminary assessment of the impact of the legislation, which will continue to be refined in subsequent periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Mar 8, 2024 | |
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.