IHOP settles with IRS for $11M

IHOP Corp. settled a dispute with the Internal Revenue Service over its federal income taxes between 2000 and 2003 and agreed to pay $11 million in taxes and interest, the company said Thursday.

The dispute is related to the tax treatment of certain franchise fee income. IHOP said it paid the $11 million, which includes $7.7 million in federal income taxes and $3.3 million in interest with no penalties due, on Wednesday.

In the agreement, IHOP will report additional income for those tax years which will increase its federal income tax liability. It will also amend its 2004 and 2005 federal tax returns to reflect the agreement, which is expected to result in a $3.1 million refund in previously paid federal income taxes.

IHOP said it must also address state income tax obligations, based on the new adjustments, within the next six months.

The settlement is not expected to effect the company's past income statements or future accounting practices as it has discontinued restaurant franchising activities under its "old business model".

Glendale-based IHOP Corp. (NYSE:IHP) franchises and operates IHOP restaurants, known for pancakes, waffles, and French toast. As of September 30, there were 1,278 IHOP restaurants in the United States and Canada.

source: www.washington.bizjournals.com

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