The ONE Group Hospitality, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Income taxes

Income taxes	9 Months Ended
Sep. 30, 2021
Income taxes
Income taxes	Note 8 – Income taxes Income taxes for the three and nine months ended September 30, 2021 are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The Company’s effective income tax rate including discrete events was 11.3% and 7.7% for the three and nine months ended September 30, 2021 compared to 27.8% and 31.9% for the three and nine months ended September 30, 2020, respectively. The Company’s annualized effective tax rate is estimated at approximately 11.0% for 2021. The Company’s projected annual effective tax rate differs from the statutory U.S. tax rate of 21% primarily due to the following: (i) tax credits for FICA taxes on certain employees’ tips (ii) taxes owed in foreign jurisdictions such as the United Kingdom, Canada and Italy; (iii) taxes owed in state and local jurisdictions; (iv) the tax effect of non-deductible compensation and (v) forgiveness of the CARES Act Loan is non-taxable. Income tax provision recorded for the three and nine months ended September 30, 2021 also included the discrete period tax benefits resulting from the vesting of restricted stock units and exercise of stock options. The CARES Act includes provisions allowing for the carryback of net operating losses generated for specific periods and technical amendments regarding the expensing of qualified improvement property. The CARES Act also allows for the deferral of the employer-paid portion of social security taxes, which the Company has elected to defer. The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and local jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company is subject to examination by the federal, state, local and foreign taxing authorities.

Income taxes

9 Months Ended

Sep. 30, 2021

Note 8 – Income taxes

Income taxes for the three and nine months ended September 30, 2021 are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The Company’s effective income tax rate including discrete events was 11.3% and 7.7% for the three and nine months ended September 30, 2021 compared to 27.8% and 31.9% for the three and nine months ended September 30, 2020, respectively. The Company’s annualized effective tax rate is estimated at approximately 11.0% for 2021. The Company’s projected annual effective tax rate differs from the statutory U.S. tax rate of 21% primarily due to the following: (i) tax credits for FICA taxes on certain employees’ tips (ii) taxes owed in foreign jurisdictions such as

the United Kingdom, Canada and Italy; (iii) taxes owed in state and local jurisdictions; (iv) the tax effect of non-deductible compensation and (v) forgiveness of the CARES Act Loan is non-taxable. Income tax provision recorded for the three and nine months ended September 30, 2021 also included the discrete period tax benefits resulting from the vesting of restricted stock units and exercise of stock options.

The CARES Act includes provisions allowing for the carryback of net operating losses generated for specific periods and technical amendments regarding the expensing of qualified improvement property. The CARES Act also allows for the deferral of the employer-paid portion of social security taxes, which the Company has elected to defer.

The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and local jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company is subject to examination by the federal, state, local and foreign taxing authorities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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