Utz Brands, Inc.UTZ
Utz Brands, Inc. Income Taxes Disclosure
INCOME TAXES
The Company is subject to federal and state income taxes with respect to our allocable share of any taxable income or loss of UBH, as well as any standalone income or loss the Company generates. UBH is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, UBH taxable income or loss is passed through to its members, including the Company. Despite its partnership treatment, UBH is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. The Company has acquired various domestic entities taxed as corporations, which are now wholly-owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for federal and state income tax purposes. The Company anticipates this structure to remain in existence for the foreseeable future.
The Company’s (Loss) income from continuing operations before income taxes is summarized below based on the geographic location of the operation to which such earnings and income taxes are attributable:
(in millions) | For the Fiscal Year Ended December 28, 2025 | For the Fiscal Year Ended December 29, 2024 | For the Fiscal Year Ended December 31, 2023 | |||||||||||||||||
| United States | $ | (0.6) | $ | 69.4 | $ | (39.2) | ||||||||||||||
| (Loss) income from continuing operations before income taxes | $ | (0.6) | $ | 69.4 | $ | (39.2) | ||||||||||||||
The provision for income taxes was as follows:
(in millions) | For the Fiscal Year Ended December 28, 2025 | For the Fiscal Year Ended December 29, 2024 | For the Fiscal Year Ended December 31, 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 3.6 | $ | 21.4 | $ | 7.8 | ||||||||||||||
| State | 1.1 | 3.2 | 1.9 | |||||||||||||||||
| Total current | 4.7 | 24.6 | 9.7 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 1.6 | 10.0 | (7.6) | |||||||||||||||||
| State | 0.8 | 4.1 | (1.3) | |||||||||||||||||
| Total deferred | 2.4 | 14.1 | (8.9) | |||||||||||||||||
| Total | $ | 7.1 | $ | 38.7 | $ | 0.8 | ||||||||||||||
A reconciliation of the of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to Loss before income taxes after the adoption of ASU 2023-09 is as follows:
| For the Fiscal Year Ended December 28, 2025 | ||||||||||||||
| (in millions) | Percent | |||||||||||||
| U.S. Federal Statutory Rate | $ | (0.1) | 21.0 | % | ||||||||||
State Income Taxes, net of federal income tax effect1 | 0.7 | (116.7) | % | |||||||||||
| Tax Credits | ||||||||||||||
| Investment Tax Credits | (1.1) | 183.3 | % | |||||||||||
| Production Tax Credits | (0.7) | 116.7 | % | |||||||||||
| Changes in Valuation Allowances | 10.3 | (1,716.7) | % | |||||||||||
| Nontaxable and Nondeductible items | ||||||||||||||
| Remeasurement of Warrant Liability | (4.8) | 800.0 | % | |||||||||||
| Noncontrolling interest in UBH | 2.4 | (400.0) | % | |||||||||||
| IRC §162(m) | 0.5 | (83.3) | % | |||||||||||
| Nondeductible Expenses | (0.2) | 33.3 | % | |||||||||||
| Other Adjustments | ||||||||||||||
| Investment in UBH | 0.6 | (100.0) | % | |||||||||||
| Return to Provision | (0.5) | 79.1 | % | |||||||||||
| Provision for income taxes | $ | 7.1 | (1,183.3) | % | ||||||||||
(1) Pennsylvania contributes to a majority (greater than 50%) of the tax effect in this category.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to (Loss) income before taxes for years prior to the adoption of ASU 2023-09 is as follows:
(in millions) | For the Fiscal Year Ended December 29, 2024 | For the Fiscal Year Ended December 31, 2023 | ||||||||||||
Federal Statutory Rate (21%) | $ | 14.6 | $ | (8.2) | ||||||||||
| State Income Taxes, net of federal benefit | 5.8 | (0.5) | ||||||||||||
| Investment in UBH | 0.9 | 0.2 | ||||||||||||
| Noncontrolling interest in UBH | (1.2) | 2.6 | ||||||||||||
| Valuation allowance | 7.6 | 5.9 | ||||||||||||
| Remeasurement of warrant liability | (2.1) | (0.5) | ||||||||||||
Return to provision | 0.3 | — | ||||||||||||
| Gain on Sale to Our Home | 12.5 | — | ||||||||||||
| IRC §162(m) | 0.3 | 1.4 | ||||||||||||
Other | — | (0.1) | ||||||||||||
Provision for income taxes | $ | 38.7 | $ | 0.8 | ||||||||||
The tax effect of temporary differences that gave rise to significant components of deferred tax assets and liabilities consisted of the following at December 28, 2025 and December 29, 2024:
(in millions) | As of December 28, 2025 | As of December 29, 2024 | ||||||||||||
| Deferred Tax Assets: | ||||||||||||||
| Accrued expenses | $ | 0.4 | $ | 0.5 | ||||||||||
| Pension, retirement and other benefits | 0.4 | 0.4 | ||||||||||||
| Inventories, including uniform capitalization | 0.1 | 0.1 | ||||||||||||
| Investment in UBH, operations | 35.9 | 30.4 | ||||||||||||
| Acquisition costs | 0.4 | 0.5 | ||||||||||||
| Net operating losses | 21.7 | 19.1 | ||||||||||||
| IRC §163(j) | 11.2 | 8.7 | ||||||||||||
| Credits | 1.0 | 0.3 | ||||||||||||
| Charitable contributions | 0.8 | — | ||||||||||||
| Other deferred tax assets | 0.1 | 0.2 | ||||||||||||
| Total gross deferred tax assets | 72.0 | 60.2 | ||||||||||||
| Valuation allowance | (66.8) | (48.7) | ||||||||||||
| Net deferred tax assets | 5.2 | 11.5 | ||||||||||||
| Deferred Tax Liabilities: | ||||||||||||||
| Plant and equipment, accelerated depreciation | (2.6) | (2.6) | ||||||||||||
| Intangibles | (59.4) | (63.4) | ||||||||||||
| Investment in UBH, nonreversing | (69.5) | (69.0) | ||||||||||||
| Other deferred tax liabilities | (0.3) | (0.2) | ||||||||||||
| Total deferred tax liabilities | (131.8) | (135.2) | ||||||||||||
| Net deferred tax liabilities | $ | (126.6) | $ | (123.7) | ||||||||||
The amount of income taxes paid, net of amounts refunded received, were as follows:
(in millions) | As of December 28, 2025 | |||||||
| Jurisdictions: | ||||||||
| Federal | $ | 2.3 | ||||||
| State and local | ||||||||
| Pennsylvania | 0.3 | |||||||
| Texas | 0.2 | |||||||
| Other states and localities | 0.7 | |||||||
| Income taxes paid, net of amounts refunded | $ | 3.5 | ||||||
The amount of cash income taxes paid, net of amounts refunded, by the Company for the fiscal years ended December 29, 2024 and December 31, 2023 was $28.7 million and $7.1 million, respectively.
Purchased Tax Credits
In December 2025, the Company purchased transferable income tax credits (generated under IRC §45Z/48) with an aggregate gross value of $17.9 million. The purchased credits are refundable under applicable law. Credits eligible for carryback may be applied to taxable periods ending 2022 through 2024, subject to statutory limitations and the availability of tax liability in those periods. Because the Company realized the full benefit of the purchased credits through utilization and expected carrybacks within the year ended December 28, 2025, the entire benefit was recognized as a $1.8 million reduction to income tax expense for 2025. As of December 28, 2025, no unutilized purchased credits remain recorded on the Consolidated Balance Sheets.
Net Operating Loss and Tax Credit Carryforward
As of December 28, 2025 and December 29, 2024, the Company and certain subsidiaries had federal net operating loss ("NOL") carryforwards of $92.9 million and $82.5 million, respectively. Of these, $27.5 million will expire, if not utilized, by 2037.
As of December 28, 2025 and December 29, 2024, the Company and certain subsidiaries also had state NOL carryforwards in the amount of $42.3 million and $34.2 million, respectively. The state NOL carryforwards continued to expire in 2025, however, some state NOL's are able to be carried forward indefinitely.
As of December 28, 2025 and December 29, 2024, the Company and certain subsidiaries had federal tax credit carryforwards in the amount of $1.0 million and $0.3 million, respectively.
Utilization of some of the federal and state NOL and credit carryforwards are subject to annual limitations due to the "change in ownership” provisions of the Code and similar state provisions. The annual limitations may result in the expiration of NOL and credit carryforwards before utilization.
Valuation Allowance
The Company recorded a valuation allowance of $66.8 million and $48.7 million at December 28, 2025 and December 29, 2024, respectively. In determining the need for a valuation allowance, the Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit use of the existing deferred tax assets (“DTAs”). As of December 28, 2025, a significant piece of objective negative evidence evaluated was the three-year cumulative loss before taxes. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company determined that there is uncertainty regarding the utilization of certain DTAs such as the investment in UBH, federal operating losses subject to annual limitations due to "change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus. Therefore, a valuation allowance has been recorded against the DTAs for which it is more-likely-than-not they will not be realized. Additionally, the Company has deferred tax liabilities ("DTLs”) related to its investment in the partnership that will not reverse in the ordinary course of business and will only reverse when the partnership is sold or liquidated. The Company has no intention of disposing of or liquidating the partnership and therefore has not considered the indefinite lived DTL as a source of income to offset other DTAs. In weighing positive and negative evidence, both objective and subjective, including its three-year cumulative loss, the Company has recorded a full valuation allowance against its DTAs related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in UBH that will not reverse in the ordinary course of operations. The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA; however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against its DTAs. The amount of DTAs considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth.
The net change in valuation allowance of $18.1 million was recorded as an increase to income tax expense of $10.3 million and adjustment to equity for $7.8 million.
As of December 28, 2025, tax years 2022 through 2025 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2021 through 2025 remain open and subject to examination in selected states that have a four year statute of limitations.
Upon audit, tax authorities may challenge all or part of a tax position. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made. The Company did not maintain any unrecognized tax benefits as of December 28, 2025 and December 29, 2024.
Tax receivable agreement liability
Pursuant to an election under section 754 of the Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase units of UBH from a third party then holding common and preferred interests of noncontrolling interests and purchased units of UBH from noncontrolling interests in our business combination in 2020. Following the 2020 business combination, the holders of noncontrolling interests (the "Noncontrolling Interest Holders") have the option to exchange Common limited liability company units of UBH ("Common Company Units") along with the forfeiture of a corresponding number of shares of Class V Common Stock of the Company for corresponding number of shares of Class A Common Stock. The Company intends to treat any such exchanges as direct purchases for U.S. federal income tax purposes, which is expected to further increase its share of the tax basis in the net assets of UBH. The increases in tax basis may reduce the amounts the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
The Company entered into the Tax Receivable Agreement in connection with our business combination in 2020 (the “Tax Receivable Agreement” or “TRA”), which provides for the payment by the Company to Noncontrolling Interest Holders of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the business combination and any future exchanges by Noncontrolling Interest Holders of shares of Class V Common Stock for shares of Class A Common Stock; (ii) tax basis increases attributable to payments made under the TRA; and (iii) tax amortization deductions attributable to the acquisition of Kennedy Endeavors and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments"). The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.
As of December 28, 2025, the Company recorded a TRA liability of $24.0 million, which is reflected as current and non-current accrued expenses in the Consolidated Balance Sheets. The Company has a total liability of $56.2 million related to its projected obligations under the TRA. The total TRA liability includes $23.0 million that relates to the business combination and $1.0 million that relates to equity transactions that occurred during prior quarters. The Company recorded a valuation allowance on its DTA, that fully covers the tax basis that originated with the equity transactions that occurred during the aforementioned periods as they are not more likely than not to be realized based on the positive and negative evidence that the Company considered. The Company has not recorded the $32.2 million of TRA liability that relates to the equity transactions that occurred during the prior periods as the liability is not probable under ASC 450 since the related DTA is not more likely than not to be realized as evidenced by the valuation allowance. The Company will continue to monitor positive and negative evidence to analyze its valuation allowance and it believes that sufficient positive evidence may arise to permit the release of a significant portion of its valuation allowance. If that were to occur, it would result in the need to record $32.2 million of additional TRA liability for the prior period equity transactions, which would result in a non-cash charge to pretax results.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Mar 2, 2023 | |
| 2022 | Mar 3, 2022 | |
| 2021 | Mar 18, 2021 | |
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.