Tim McLaughlin reports at the Boston Business Journal that the Dunkin’ gift card you got for Christmas (the one sitting in your sock drawer) could put a small crimp in the Dunkin’ Donuts parent company’s plan for an IPO
Dunkin’ Brands Group is at odds with the IRS over liabilities related to its gift cards and certificates.
In its registration for an initial public offering, Dunkin’ Brands said that last fall the IRS proposed increasing its taxable income for fiscal years 2006 and 2007 by $58.9 million. The proposed adjustment centers on how to recognize income once a gift card is activated.
“The proposed adjustment would result in additional taxable income of approximately $58.9 million for these years and approximately $26 million of additional federal and state taxes and interest owed, net of federal and state benefits,” the company said in a filing with the Securities and Exchange Commission. “If the IRS prevails, a cash payment would be required and the additional taxable income would represent temporary differences that will be deductible in future years.”
However, the potential tax expense related to the IRS adjustments for fiscal 2006 and 2007 would be limited to $2.1 million, the company said. Dunkin’ Brands also said it believes it has properly reported taxable income related to gift cards.