On December 3, 2024, Tootsie Roll Industries' Board of Directors revoked a prior authorization from December 28, 2018, concerning the full income tax deductibility of certain amounts under its nonqualified deferred compensation plans. This decision was made after determining it was no longer feasible to secure full tax deductions on all accrued deferred compensation, primarily due to interpretations of Section 162(m) of the Internal Revenue Code adopted by the IRS and the growth of plan account balances.
As a direct consequence of this Board action, the company expects to record a non-cash tax charge ranging between approximately $11 million and $12 million in the fourth quarter of 2024. This charge will be reflected as an adjustment to deferred tax assets in the company's annual report on Form 10-K for fiscal year 2024.
The company does not anticipate that this write-off will result in future cash expenditures. Instead, the impact will be the company's inability to deduct certain deferred compensation payments against future taxable income. This development highlights a material accounting adjustment impacting reported earnings for the fiscal year.
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