INCOME TAXES |
3 Months Ended |
|---|---|
Mar. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES We are the sole managing member of Portillo's OpCo, and as a result, consolidate the financial results of Portillo's OpCo. Portillo's OpCo is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Portillo's OpCo is generally not subject to U.S. federal and state and local income taxes. Any taxable income or loss generated by Portillo's OpCo is passed through to and included in the taxable income or loss of its members, including us, based upon the respective member's ownership percentage in Portillo's OpCo. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of Portillo's OpCo, as well as any stand-alone income or loss generated by Portillo's Inc. Income Tax Expense The effective income tax rate for the quarters ended March 30, 2025 and March 31, 2024 was 25.4% and (27.0)%, respectively. The increase in our effective income tax rate for the quarter ended March 30, 2025 compared to the quarter ended March 31, 2024 was primarily driven by lapping the prior year's reduction in the valuation allowance as a result of the Q1 2024 Secondary Offering. The Company’s annual effective tax rate differs from the statutory rate of 21% primarily because of state and local taxes, deferred tax adjustments and impacts from equity-based award activity partially offset by the portion of Portillo's OpCo earnings that are attributable to non-controlling interest that the Company is not liable for federal or state income taxes. We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of March 30, 2025, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets relating to the basis difference in its investment in Portillo's OpCo that will never be realizable or only reverse upon the eventual sale of its interest in Portillo's OpCo, which we expect would result in a capital loss which we do not expect to be able to utilize) are more likely than not to be realized. Tax Receivable Agreement As of March 30, 2025, we estimated that our obligation for future payments under the TRA liability totaled $316.2 million. For the quarters ended March 30, 2025 and March 31, 2024, the Company made TRA payments of $7.7 million relating to tax year 2023 and $4.4 million relating to tax year 2022, respectively. We expect a payment of $9.0 million relating to tax year 2024 to be paid within the next 12 months.
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