Vital Farms, Inc. Income Taxes Disclosure
17. Income Taxes
The Company’s income before income taxes is entirely derived from domestic sources for all periods presented:
|
|
December 28, |
|
|
December 29, |
|
|
December 31, |
|
|||
Domestic |
|
$ |
91,264 |
|
|
$ |
67,538 |
|
|
$ |
32,201 |
|
Net income before income taxes |
|
$ |
91,264 |
|
|
$ |
67,538 |
|
|
$ |
32,201 |
|
For the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023, the provision for income taxes consisted of the following:
|
|
December 28, |
|
|
December 29, |
|
|
December 31, |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
16,971 |
|
|
$ |
12,604 |
|
|
$ |
5,136 |
|
State |
|
|
7,322 |
|
|
|
3,410 |
|
|
|
1,678 |
|
Total current income tax expense |
|
|
24,293 |
|
|
|
16,014 |
|
|
|
6,814 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
1,303 |
|
|
|
(1,603 |
) |
|
|
28 |
|
State |
|
|
(614 |
) |
|
|
(261 |
) |
|
|
(207 |
) |
Total deferred income tax expense |
|
|
689 |
|
|
|
(1,864 |
) |
|
|
(179 |
) |
Provision for income taxes |
|
$ |
24,982 |
|
|
$ |
14,150 |
|
|
$ |
6,635 |
|
For the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023, the income taxes paid by the Company, net of amounts refunded are as follows:
|
|
December 28, |
|
|
December 29, |
|
|
December 31, |
|
|||
Federal |
|
$ |
18,479 |
|
|
$ |
13,298 |
|
|
$ |
4,646 |
|
State: |
|
|
|
|
|
|
|
|
|
|||
California |
|
|
2,199 |
|
|
|
1,608 |
|
|
|
328 |
|
All others |
|
|
3,495 |
|
|
|
1,559 |
|
|
|
1,001 |
|
Total income taxes paid, net of amounts refunded |
|
$ |
24,173 |
|
|
$ |
16,465 |
|
|
$ |
5,975 |
|
The reconciliation of the federal statutory income tax provision to the Company’s effective income tax provision is as follows:
|
|
December 28, |
|
|
December 29, |
|
|
December 31, |
|
|||||||||||||||
Net income before income taxes |
|
$ |
91,264 |
|
|
|
|
|
$ |
67,538 |
|
|
|
|
|
$ |
32,201 |
|
|
|
|
|||
US federal statutory rate |
|
|
19,165 |
|
|
|
21.0 |
% |
|
|
14,183 |
|
|
|
21.0 |
% |
|
|
6,762 |
|
|
|
21.0 |
% |
Current state and local income taxes, net of federal income tax effect(1) |
|
|
4,301 |
|
|
|
4.7 |
% |
|
|
2,552 |
|
|
|
3.8 |
% |
|
|
1,117 |
|
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax credits |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
(238 |
) |
|
|
(0.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in valuation allowance |
|
|
(3 |
) |
|
|
(0.0 |
%) |
|
|
— |
|
|
|
0.0 |
% |
|
|
84 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Nontaxable or nondeductible items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Nondeductible compensation |
|
|
4,131 |
|
|
|
4.5 |
% |
|
|
7,851 |
|
|
|
11.6 |
% |
|
|
540 |
|
|
|
1.7 |
% |
Share-based payment awards |
|
|
(3,456 |
) |
|
|
(3.8 |
%) |
|
|
(10,236 |
) |
|
|
(15.2 |
%) |
|
|
(1,636 |
) |
|
|
(5.1 |
%) |
Other nontaxable costs |
|
|
(76 |
) |
|
|
(0.1 |
%) |
|
|
(168 |
) |
|
|
(0.2 |
%) |
|
|
(56 |
) |
|
|
(0.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Changes in unrecognized tax benefits |
|
|
1,100 |
|
|
|
1.2 |
% |
|
|
(82 |
) |
|
|
(0.1 |
%) |
|
|
58 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other adjustments |
|
|
(180 |
) |
|
|
(0.2 |
%) |
|
|
50 |
|
|
|
0.1 |
% |
|
|
4 |
|
|
|
0.0 |
% |
Provision for income taxes |
|
$ |
24,982 |
|
|
|
27.4 |
% |
|
$ |
14,150 |
|
|
|
21.0 |
% |
|
$ |
6,635 |
|
|
|
20.6 |
% |
(1) State taxes in California, New Jersey and Florida made up greater than 50% of the tax effect in this category for the fiscal years ended December 28, 2025 and December 31, 2023 and state taxes in California and New Jersey made up greater than 50% of the tax effect in this category for the fiscal year ended December 29, 2024.
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred income tax assets and liabilities as of December 28, 2025 and December 29, 2024 were comprised of the following:
|
|
December 28, |
|
|
December 29, |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
5,598 |
|
|
$ |
5,226 |
|
Allowances and other reserves |
|
|
183 |
|
|
|
173 |
|
Inventory |
|
|
4,468 |
|
|
|
765 |
|
Net operating loss carryforwards |
|
|
107 |
|
|
|
106 |
|
Stock-based compensation |
|
|
2,236 |
|
|
|
1,921 |
|
ROU lease liability |
|
|
13,641 |
|
|
|
4,599 |
|
Other |
|
|
962 |
|
|
|
471 |
|
Total deferred tax assets |
|
|
27,195 |
|
|
|
13,261 |
|
Less: Valuation allowance |
|
|
(81 |
) |
|
|
(84 |
) |
Net deferred tax assets |
|
$ |
27,114 |
|
|
$ |
13,177 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Prepaid expenses |
|
$ |
1,079 |
|
|
$ |
776 |
|
Property and equipment |
|
|
11,704 |
|
|
|
6,216 |
|
Operating and finance lease ROU assets |
|
|
12,953 |
|
|
|
4,204 |
|
Intangible assets |
|
|
682 |
|
|
|
582 |
|
Total deferred tax liabilities |
|
$ |
26,418 |
|
|
$ |
11,778 |
|
Net deferred tax assets |
|
$ |
696 |
|
|
$ |
1,399 |
|
A valuation allowance is required to be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A full review of all positive and negative evidence needs to be considered, including the Company’s current and past performance, the market environments in which the Company operates, the utilization of past tax credits, the length of carry back and carry forward periods and tax planning strategies that might be implemented. Management considered the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment.
The activity in the Company’s deferred tax asset valuation allowance for the fiscal years ended December 28, 2025 and December 29, 2024 were as follows:
|
|
December 28, |
|
|
December 29, |
|
||
Valuation allowance as of beginning of year |
|
$ |
84 |
|
|
$ |
84 |
|
Increases recorded to income tax provision |
|
|
(3 |
) |
|
|
— |
|
Valuation allowance as of end of year |
|
$ |
81 |
|
|
$ |
84 |
|
As of December 28, 2025, the Company had unrecognized tax benefits, which represent the aggregate tax effect of the differences between tax return positions and the benefits recognized in the Company’s financial statements. At December 28, 2025, all of the unrecognized tax benefits, if recognized, would affect the Company’s annual effective tax rate. The unrecognized tax benefits are long-term in nature and the Company does not anticipate the balance of the unrecognized tax benefits to change materially in the next 12 months.
|
|
December 28, |
|
|
December 29, |
|
||
Gross tax contingencies as of beginning of year |
|
$ |
415 |
|
|
$ |
654 |
|
Increase in gross tax contingencies |
|
|
933 |
|
|
|
— |
|
Decrease in gross tax contingencies |
|
|
(174 |
) |
|
|
(239 |
) |
Gross tax contingencies as of end of year |
|
$ |
1,174 |
|
|
$ |
415 |
|
As of December 28, 2025 and December 29, 2024, the Company had uncertain tax positions of $1.7 million and $0.6 million and deferred tax liabilities of $1.1 million and $0, respectively, under the heading “Other liabilities” in the consolidated balance sheets.
The Company files a U.S. federal income tax return, as well as income tax returns in various states. Tax years 2022 and forward remain open to examination by the tax jurisdictions to which the Company is subject, with certain state taxing jurisdictions being open back to 2019.
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.