INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax (benefit) expense consists of the following:

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	5,556	$	(2,197)	$	148
State and Local	1,470		4,084		3,411
Total Current Income Tax Expense (Benefit)	7,026		1,887		3,559
Deferred:
Federal	130,696		17,516		28,939
State and Local	20,504		(2,487)		9,268
Total Deferred Income Tax Expense (Benefit)	151,200		15,029		38,207
Total Income Tax (Benefit) Expense	$	158,226	$	16,916	$	41,766

New Residential intends to qualify as a REIT for each of its tax years through December 31, 2021. A REIT is generally not subject to U.S. federal corporate income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements.

New Residential operates various business segments, including servicing, origination, and MSR related investments, through taxable REIT subsidiaries (“TRSs”) that are subject to regular corporate income taxes, which have been provided for in the provision for income taxes, as applicable. Refer to Note 4 (Segment Reporting) for further details.

The increase in income tax expense for the year ended December 31, 2021 is primarily driven by current and deferred tax expense resulting from changes in the fair value of loans, MSRs, and swaps held within taxable entities as well as income generated by the servicing and origination business segments.

The decrease in income tax expense for the year ended December 31, 2020 is primarily driven by deferred tax benefits resulting from changes in the fair value of loans and MSRs during the first quarter of 2020, offset by deferred and current tax expense generated from income in the servicing an origination business segments.

The difference between New Residential’s reported provision for income taxes and the U.S. federal statutory rate of 21% is as follows:

	December 31,
	2021		2020		2019
Provision at the statutory rate	21.00	%	21.00	%	21.00	%
Non-taxable REIT income	(7.38)	%	(26.44)	%	(16.26)	%
State and local taxes	3.86	%	3.70	%	2.36	%
Return to provision	(1.10)	%	0.12	%	0.57	%
Other	0.04	%	0.45	%	0.09	%
Total provision	16.42	%	(1.17)	%	7.76	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liability are presented below:

	December 31,
	2021		2020
Deferred tax assets:
Net operating losses and tax credit carryforwards(A)	$	76,642	$	5,636
Basis differences related to assets and investments	85,104		18,868
Goodwill	30,485		—
Accrued Expenses	20,171		—
Other	4,632		705
Total deferred tax assets	217,034		25,209
Less valuation allowance	—		—
Net deferred tax assets	$	217,034	$	25,209
Deferred tax liabilities:
Mortgage servicing rights	$	(594,801)	$	(16,189)
Basis differences related to assets and investments	(21,672)		(12,539)
Fixed asset depreciation	(14,495)		(1,231)
Unrealized mark to market	(26,021)		—
Other	(735)		(3,109)
Total deferred tax (liability)	$	(657,724)	$	(33,068)
Net deferred tax assets (liability)	$	(440,690)	$	(7,859)

(A)As of December 31, 2021, New Residential’s TRSs had approximately $266.8 million of net operating loss carryforwards for federal and state income tax purposes which may be available to offset future taxable income, if and when it arises. Approximately, $33.8 million of federal net operating losses are subject to an annual Internal Revenue Code Section 382 limitation. The federal and state net operating loss carryforwards will begin to expire between 2034 and 2040. The utilization of the net operating loss carryforwards to reduce future income taxes will depend on the TRSs ability to generate sufficient taxable income prior to the expiration of the carryforward period.

In assessing the realizability of deferred tax assets, New Residential considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the

generation of future taxable income during the periods in which temporary differences become deductible. As of December 31, 2021, the Company believes it is more likely than not that it will fully realize its deferred tax assets.

New Residential and its TRSs file income tax returns with the U.S. federal government and various state and local jurisdictions. Generally, New Residential is no longer subject to tax examinations by tax authorities for tax years ended prior to December 31, 2018. New Residential recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes on the consolidated statements of operations. As of December 31, 2021, New Residential has no material uncertainties to be recognized. New Residential does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.

Common stock distributions were taxable as follows:

Year	Dividends per Share		Ordinary Income		Long-term Capital Gain		Return of Capital
2021(A)	$	0.50	58.84	%	—	%	41.16	%
2020(B)	$	0.62	78.01	%	—	%	21.99	%
2019(C)	$	1.87	77.53	%	15.82	%	6.65	%

(A)The entire $0.25 per share dividend declared in December 2021 and paid in January 2022 is treated as received by stockholders in 2022.

(B)The entire $0.20 per share dividend declared in December 2020 and paid in January 2021 is treated as received by stockholders in 2021.

(C)The entire $0.50 per share dividend declared in December 2019 and paid in January 2020 is treated as received by stockholders in 2020.

Series A Preferred stock distributions were as follows:

Year	Dividends per Share		Ordinary Income		Long-term Capital Gain		Return of Capital
2021(A)	$	1.88	100	%	—	%	—	%
2020(B)	$	1.88	100	%	—	%	—	%

(A)The entire $0.47 per share dividend declared in December 2021 and paid in January 2022 is treated as received by stockholders in 2022.

(B)The entire $0.47 per share dividend declared in December 2020 and paid in January 2021 is treated as received by stockholders in 2021.

Series B Preferred stock distributions were as follows:

Year	Dividends per Share		Ordinary Income		Long-term Capital Gain		Return of Capital
2021(A)	$	1.78	100	%	—	%	—	%
2020(B)	$	1.78	100	%	—	%	—	%

(A)The entire $0.45 per share dividend declared in December 2021 and paid in January 2022 is treated as received by stockholders in 2022.

(B)The entire $0.45 per share dividend declared in December 2020 and paid in January 2021 is treated as received by stockholders in 2021.

Series C Preferred stock distributions were as follows:

Year	Dividends per Share		Ordinary Income		Long-term Capital Gain		Return of Capital
2021(A)	$	1.59	100	%	—	%	—	%
2020(B)	$	1.20	100	%	—	%	—	%

(A)The entire $0.40 per share dividend declared in December 2021 and paid in January 2022 is treated as received by stockholders in 2022.

(B)The entire $0.40 per share dividend declared in December 2020 and paid in January 2021 is treated as received by stockholders in 2021.

Series D Preferred stock distributions were as follows:

Year	Dividends per Share		Ordinary Income		Long-term Capital Gain		Return of Capital
2021(A)	$	0.28	100	%	—	%	—	%

(A)The entire $0.28 per share dividend declared in December 2021 and paid in January 2022 is treated as received by stockholders in 2022.