INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

NOTE 21.       INCOME TAXES

The Company elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2020. The Company believes that, commencing with such taxable year, it has been organized and has operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws. The Company intends to continue to operate in such a manner. As a REIT, the Company will be subject to U.S. federal and state income taxation at corporate rates on its net taxable income; the Company, however, may claim a deduction for the amount of dividends paid to its stockholders. Amounts distributed as dividends by the Company will be subject to taxation at the stockholder level only. While the Company must distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, to qualify as a REIT, the Company intends to distribute all of its net taxable income. The Company is allowed certain other non-cash deductions or adjustments, such as depreciation expense, when computing its REIT taxable income and distribution requirement. These deductions permit the Company to reduce its dividend payout requirement under U.S. federal income tax laws. Certain states may impose minimum franchise taxes. To comply with certain REIT requirements, the Company holds certain of its non-REIT assets and operations through taxable REIT subsidiaries (“TRSs”) and subsidiaries of TRSs, which are subject to applicable U.S. federal, state and local corporate income tax on their taxable income. For the taxable years ended December 31, 2023 and 2022, the Company held a total of two TRSs, each subject to taxation and the separate filing of its corporate income tax returns. As of January 1, 2024, the Company consolidated its TRSs into one TRS subject to taxation and the filing of a single corporate income tax return.

As a result of the Company’s election to be taxed as a REIT, during the year ended December 31, 2020, an $82.5 million deferred tax benefit was recorded to de-recognize the deferred tax assets and liabilities associated with the entities included in the REIT. A significant portion of the deferred tax benefit recognized related to the de-recognition of deferred tax liabilities resulting from Internal Revenue Code Section 1031 like-kind exchanges (“1031 Exchanges”). The Company will be subject to corporate income taxes related to assets held by it that are sold during the 5-year period following the date of conversion to the extent such sold assets had a built-in gain as of January 1, 2020. The Company has disposed of certain, primarily single-tenant REIT assets after the REIT conversion within the 5-year period. All such sales were completed using 1031 Exchanges or other deferred tax structures to mitigate the built-in gain tax liability of conversion.

Total income tax benefit (expense) is summarized as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Income Tax Benefit (Expense)	$	339	$	(604)	$	2,830

The provisions for income tax benefit (expense) are summarized as follows (in thousands):  

	2024				2023				2022
	Current		Deferred		Current		Deferred		Current		Deferred
Federal	$	(119)	$	405	$	(83)	$	(427)	$	(183)	$	2,571
State		—		53		—		(94)		—		442
Total	$	(119)	$	458	$	(83)	$	(521)	$	(183)	$	3,013

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The sources of these differences and the related deferred income tax assets (liabilities) are summarized as follows (in thousands):

	Deferred Tax
	2024		2023
Deferred Income Tax Assets
Capital Loss Carryforward	$	1,506	$	1,663
Net Operating Loss Carryforward		2,499		2,277
Gross Deferred Income Tax Assets		4,005		3,940
Less - Valuation Allowance		(1,506)		(1,663)
Net Deferred Income Tax Assets		2,499		2,277
Deferred Income Tax Liabilities
Unrealized Gain on Investment Securities		(32)		(240)
Basis Differences in Mitigation Credit Assets		—		(28)
Total Deferred Income Tax Liabilities		(32)		(268)
Net Deferred Income Tax Liabilities	$	2,467	$	2,009

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the realization of future taxable income during the periods in which those temporary differences become deductible. We consider past history, the scheduled reversal of taxable temporary differences, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2024 and 2023, the Company had $2.5 million and $2.3 million in deferred tax assets related to net operating loss (“NOL”) carryforwards, respectively. The Tax Cuts and Jobs Act allows for indefinite carryforwards for all NOLs generated in taxable years beginning after December 31, 2017. Accordingly, as of December 31, 2024 and 2023, no valuation allowance was considered necessary related to the Company’s NOL carryforwards. As of December 31, 2024 and 2023, the Company had a capital loss carryforward totaling $5.9 million and $6.6 million, respectively. Although the Company utilized $0.6 million and $0.7 million of the capital loss carryforwards during the years ended December 31, 2024 and 2023, respectively, the Company does not currently anticipate being able to fully utilize the remaining capital loss carryforward and accordingly, has allowed for the $1.5 million and $1.7 million deferred tax asset in full as of December 31, 2024 and 2023, respectively.

Following is a reconciliation of the income tax computed at the federal statutory rate of 21% for 2024, 2023, and 2022, individually, for continuing operations (in thousands):

	Year Ended December 31,
	2024				2023				2022
Income Tax Benefit (Expense) Computed at Federal Statutory Rate	$	384	16.7	%	$	(353)	(5.8)	%	$	2,795	852.1	%
Increase (Decrease) Resulting from:
State Income Tax, Net of Federal Income Tax Benefit		101	4.4	%		(92)	(1.5)	%		593	180.8	%
Income Tax on Permanently Non-Deductible Items		(153)	(6.6)	%		(158)	(2.6)	%		(484)	(147.6)	%
Income Tax on Capital Gains offsetting Capital Loss Carryforward		157	6.8	%		113	1.8	%		—	0.0	%
Valuation Allowance		—	0.0	%		—	0.0	%		—	0.0	%
Other Reconciling Items		(150)	(6.5)	%		(114)	(1.9)	%		(74)	(22.6)	%
Benefit (Expense) for Income Taxes	$	339	14.7	%	$	(604)	(9.8)	%	$	2,830	862.8	%

The effective income tax rate assumes a blended rate for estimated state and local taxes on its income and property. The effective income tax rate for the years ended December 31, 2024, 2023, and 2022 was 14.7%, (9.8)%, and 862.8%, respectively. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in the period that they occur. There were no discrete events during the years ended December 31, 2024, 2023 or 2022.

For prior taxable years through the year ended December 31, 2023, the Company has filed a consolidated income tax return in the United States Federal jurisdiction, and in all required states. The Internal Revenue Service (“IRS”) has audited the federal tax returns through the year 2012, with all proposed adjustments settled. The Florida Department of Revenue has audited the Florida tax returns through the year 2014, with all proposed adjustments settled. For the years ended December 31, 2024, 2023, and 2022, the Company recognized no uncertain tax positions or accrued interest and penalties for uncertain tax positions. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of the income tax provision (benefit) in the applicable period.

Income taxes totaling $0.2 million, $0.3 million, and $0.1 million were paid during the years ended December 31, 2024, 2023, and 2022, respectively. Additionally, income taxes totaling $0.3 million and $0.4 million were refunded during the years ended December 31, 2024 and 2023, respectively, with no income taxes refunded during the year ended December 31, 2022.