Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 14 - Income Taxes

The following table reconciles our GAAP net income (loss) to estimated REIT taxable income (loss) for the years ended December 31, 2021, December 31, 2020 and December 31, 2019.

	For the Years Ended
	December 31, 2021		December 31, 2020		December 31, 2019
GAAP net income (loss)	$	15,363	$	(215,112)	$	(249,905)
Book to tax differences:
TRS (income) loss	37		(51)		(147)
Premium amortization expense	(148)		(261)		—
Agency Securities, trading	77,145		(19,557)		—
Credit Risk and Non-Agency Securities	—		188,075		24,459
Interest-Only Securities	—		—		85
U.S. Treasury Securities	9,391		(21,357)		(2,024)
Changes in interest rate contracts	(77,300)		268,159		375,493
(Gain) Loss on Security sales	(10,952)		(143,877)		(9,611)
Credit loss expense	—		1,012		—
Amortization of deferred hedging costs	(163,837)		(152,092)		(69,302)
Series A Cumulative Preferred Stock dividend- Called for redemption	—		—		375
Series B Cumulative Preferred Stock dividend- Called for redemption	—		1,375		—
Other	1,830		1,544		18
Estimated REIT taxable income (loss)	$	(148,471)	$	(92,142)	$	69,441

Interest rate and futures 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. At December 31, 2021 and December 31, 2020, we had approximately $607,000 and $717,000 in tax deductible expense relating to previously terminated interest rate swap contracts amortizing through the years 2031 and 2029, respectively. At December 31, 2021, we had $91,961 of net operating loss carryforwards available for use indefinitely.

Net capital losses realized	Amount	Available to offset capital gains though
2018	(136,388)	2023
2019	(13,819)	2024
2021	(9,012)	2026

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 years ended December 31, 2021 and December 31, 2020, we recorded $0 and $36, respectively 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, 2021, by approximately $233,011, or approximately $2.47 per common share (based on the 94,152 common shares then outstanding). State and federal tax returns for the years 2018 and later remain open and are subject to possible examination.

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 for the year ended December 31, 2021, were $108,103. Total dividend payments to stockholders for the year ended December 31, 2020, were $86,648 (including the final dividend on the Series B Preferred Stock, called for redemption of $1,375 paid on February 27, 2020 to holders of record on February 15, 2020). Total dividend payments to stockholders for the year ended December 31, 2019, 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).

Our estimated REIT taxable income (loss) available for distribution as dividends was $(148,471), $(92,142) and $69,441 for the years ended December 31, 2021, December 31, 2020 and December 31, 2019, 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 100.0% in 2021, 100.0% in 2020 and 56.8% in 2019.

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.