Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 23—Income Taxes

The Company’s effective tax rate was 11.1% and (19.8)% with consolidated pretax income of $28.6 million and $61.0 million for the quarter and six months ended June 30, 2024. The Company’s taxable REIT subsidiary (“TRS”) recognized a tax expense of
$3.0 million on pretax income of $9.9 million and a tax benefit of $12.0 million on a pretax loss of $51.0 million for the quarter and six months ended June 30, 2024. For the same periods in 2023, the TRS recognized a tax expense of $21.2 million on pretax income of $77.9 million and a tax benefit of $0.6 million on a pretax loss of $12.2 million. The Company’s reported consolidated pretax income was $46.9 million for the quarter ended June 30, 2023. The primary difference between the Company’s effective tax rate and the statutory tax rate is generally attributable to nontaxable REIT income resulting from the dividends paid deduction.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of June 30, 2024, the valuation allowance remains zero. The conclusion was primarily based on the fact that the TRS has reported cumulative GAAP income over the last three-year period ending June 30, 2024. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.

In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. For tax years beginning after December 31, 2017, the 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a 20% deduction from taxable income for ordinary REIT dividends.