Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 - Income Taxes

The following table reconciles our GAAP net income (loss) to estimated REIT taxable loss for the three and six months ended June 30, 2022 and June 30, 2021.

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
GAAP net income (loss)	$	(58,591)	$	(69,174)	$	(125,025)	$	2,153
Book to tax differences:
TRS income	(6)		(59)		(7)		(66)
Premium amortization expense	(36)		(28)		(78)		(76)
Agency Securities, trading	249,022		(19,183)		503,411		43,403
U.S. Treasury Securities	33,983		—		112,370		28
Changes in interest rate contracts	(204,744)		88,542		(455,644)		(33,653)
(Gain) loss on Security Sales	7,501		—		7,501		(7,354)
Amortization of deferred hedging costs	(36,716)		(39,998)		(76,296)		(81,865)
Other	610		419		1,160		837
Estimated REIT taxable loss	$	(8,977)	$	(39,481)	$	(32,608)	$	(76,593)

Interest rate contracts 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 June 30, 2022 and at December 31, 2021, we had approximately $530,704 and $607,000 in tax deductible expense relating to previously terminated interest rate swap contracts amortizing through the year 2031. At June 30, 2022, we had $240,428 of net operating loss carryforwards available for use indefinitely.

Net capital losses realized	Amount		Available to offset capital gains through
2018	$	(136,388)	2023
2019	$	(13,819)	2024
2021	$	(15,605)	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.

The aggregate tax basis of our assets and liabilities was greater than our total Stockholders’ Equity at June 30, 2022 by approximately $317,916, or approximately $2.87 per common share (based on the 110,586 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 three and six months ended June 30, 2022 and June 30, 2021 were $35,153 and $67,256 and $26,193 and $48,736, 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.

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.