INCOME TAX

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAX

INCOME TAX

    The Company wholly owns ACRC Lender W TRS LLC, which is a taxable REIT subsidiary (“TRS”) formed to issue and hold certain loans intended for sale. The Company also wholly owns ACRC 2017-FL3 TRS LLC, which is a TRS formed to hold a portion of the FL3 CLO Securitization and FL4 CLO Securitization (as defined below), including the portion that generates excess inclusion income. Additionally, the Company wholly owns ACRC WM Tenant LLC, which is a TRS formed to lease from an affiliate the hotel property classified as real estate owned acquired on March 8, 2019. ACRC WM Tenant LLC engaged a third-party hotel management company to operate the hotel under a management contract prior to the sale of the hotel on March 1, 2022.

The income tax provision for the Company and the TRSs consisted of the following for the three and six months ended June 30, 2022 and 2021 ($ in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021
Current	$	8	$	408	$	24	$	472
Deferred	—		—		—		—
Excise tax	90		—		180		121
Total income tax expense, including excise tax	$	98	$	408	$	204	$	593

    For the three and six months ended June 30, 2022, the Company incurred an expense of $90 thousand and $180 thousand respectively, for U.S. federal excise tax. For the three months ended June 30, 2021, the Company did not incur any U.S. federal excise tax expense. For the six months ended June 30, 2021 the Company incurred $121 thousand for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the calendar year (including any distribution declared in the fourth quarter and paid following January) plus any prior year shortfall. If it is determined that an excise tax liability exists for the current tax year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The quarterly expense is calculated in accordance with applicable tax regulations.

The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.

As of June 30, 2022, tax years 2018 through 2021 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.