Income Taxes

9 Months Ended

Sep. 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 income (loss) for the three and nine months ended September 30, 2022 and September 30, 2021.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
GAAP net income (loss)	$	(144,315)	$	33,982	$	(269,340)	$	36,135
Book to tax differences:
TRS (income) loss	12		23		5		(43)
Premium amortization expense	(2)		(41)		(80)		(117)
Agency Securities, trading	514,483		2,387		1,017,894		45,790
U.S. Treasury Securities	15,951		9,170		128,321		9,198
Changes in interest rate contracts	(351,203)		(37,384)		(806,847)		(71,037)
Credit loss expense	4,183		—		4,183		—
(Gain) loss on Security Sales	—		(3,724)		7,501		(11,078)
Amortization of deferred hedging costs	(36,482)		(40,664)		(112,778)		(122,529)
Other	625		531		1,785		1,368
Estimated REIT taxable income (loss)	$	3,252	$	(35,720)	$	(29,356)	$	(112,313)

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 September 30, 2022 and at December 31, 2021, we had approximately $454,072 and $607,000 in tax deductible expense relating to previously terminated interest rate swap contracts amortizing through the year 2032. At September 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 September 30, 2022 by approximately $459,260, or approximately $3.46 per common share (based on the 132,589 common shares then outstanding). State and federal tax returns for the years 2019 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 nine months ended September 30, 2022 and September 30, 2021 were $40,140 and $107,396 and $28,456 and $77,192, 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.