Income Taxes

12 Months Ended

Dec. 31, 2019

Note 14 - Income Taxes

The following table reconciles our GAAP net income (loss) to estimated REIT taxable income for the years ended December 31, 2019, December 31, 2018 and December 31, 2017.



	For the Years Ended
	December 31, 2019			December 31, 2018			December 31, 2017
GAAP net income (loss)	$	(249,905	)	$	(105,966	)	$	181,154
Book to tax differences:
TRS income	(147		)	(265		)	—
Premium amortization expense	—			(1,132		)	(468		)
Credit Risk and Non-Agency Securities	24,459			26,509			(68,505		)
Interest-Only Securities	85			318			1,216
U.S. Treasury Securities	(2,024		)	6,365			—
Changes in interest rate contracts	375,493			(1,346		)	(49,930		)
(Gain) Loss on sales of Agency Securities	(9,611		)	152,950			8,486
Other than temporary loss on Agency Securities	—			12,090			13,707
Amortization of deferred hedging costs	(69,302		)	(56,378		)	(59,930		)
Series A Cumulative Preferred Stock dividend- Called for redemption	375			—			—
Other	18			16			15
Estimated taxable income	$	69,441		$	33,161		$	25,745

Interest rate contracts are treated as hedging transactions for U. S. federal income tax purposes. Unrealized gains and losses on open interest rate contracts are not included in the determination of REIT taxable income. Realized

gains and losses on interest rate contracts terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income.



Net capital losses realized	Amount		Available to offset capital gains though
2015	(5,182	)	2020
2016	(31,204	)	2021
2017	(7,375	)	2022
2018	(216,634	)	2023

The Company's subsidiary, ARMOUR TRS, Inc. has made an election as a taxable REIT subsidiary (“TRS”). As such, the TRS is taxable as a domestic C corporation and subject to federal, state, and local income taxes based upon its taxable income. During the year ended December 31, 2019, we recorded $25 of income tax expense attributable to our TRS.

The aggregate tax basis of our assets and liabilities was greater than our total Stockholders’ Equity at December 31, 2019, by approximately $818, or approximately $0.01 per common share (based on the 58,877 common shares then outstanding).

We are required and intend to timely distribute substantially all of our REIT taxable income in order to maintain our REIT status under the Code. Total dividend payments to stockholders were $140,486 (including the final dividend on the Series A Preferred Stock, called for redemption of $375 paid on July 29, 2019 to holders of record on July 15, 2019), $114,056 and $105,289 for the years ended December 31, 2019, December 31, 2018 and December 31, 2017, respectively. Our estimated REIT taxable income available for distribution as dividends was $69,441, $33,161 and $25,745 for the years ended December 31, 2019, December 31, 2018 and December 31, 2017, respectively. Our REIT taxable income and dividend requirements to maintain our REIT status are determined on an annual basis. Dividends paid in excess of current tax earnings and profits for the year will generally not be taxable to common stockholders. The portion of the dividends on our common stock which represented non-taxable return of capital was approximately 56.8% in 2019, 83.2% in 2018 and 89.0% in 2017.

Our management is responsible for determining whether tax positions taken by us are more likely than not to be sustained on their merits. We have no material unrecognized tax benefits or material uncertain tax positions.