Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Farmer Mac is subject to federal corporate income taxes but is exempt from state and local corporate income taxes.  The components of the federal corporate income tax expense for the years ended December 31, 2020, 2019, and 2018 were as follows:

Table 10.1

	For the Year Ended December 31,
	2020		2019		2018
	(in thousands)
Current income tax expense	$	30,634	$	28,316	$	25,317
Deferred income tax expense	(1,849)		789		2,625
Income tax expense	$	28,785	$	29,105	$	27,942

A reconciliation of income tax at the statutory federal corporate income tax rate to the income tax expense for the years ended December 31, 2020, 2019, and 2018 is as follows:

Table 10.2

	For the Year Ended December 31,
	2020			2019			2018
	(dollars in thousands)
Tax expense at statutory rate	$	28,861		$	29,117		$	28,564
Excess tax benefits related to stock-based awards	(9)			(449)			(946)
Valuation allowance	—			49			—
Other	(67)			388			324
Income tax expense	$	28,785		$	29,105		$	27,942
Statutory tax rate	21.0		%	21.0		%	21.0		%

The components of the deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows:

Table 10.3

	As of December 31,
	2020		2019
	(in thousands)
Deferred tax assets:
Basis differences related to financial derivatives	$	100,099	$	51,177
Unrealized losses on securities	—		2,805
Allowance for losses	3,690		2,650
Unrealized losses on cash flow hedges	6,065		1,491
Compensation and benefits	1,020		819
Stock-based compensation	1,027		571
Capital loss carryforwards and other-than-temporary impairment	86		86
Valuation allowance	(86)		(86)
Other	341		88
Total deferred tax assets	112,242		59,601
Deferred tax liability:
Basis differences related to hedged items	91,460		42,940
Unrealized gains on securities	2,364		—
Other	97		151
Total deferred tax liability	93,921		43,091
Net deferred tax asset	$	18,321	$	16,510

After the evaluation of both positive and negative objective evidence regarding the likelihood that its deferred tax assets will be realized, Farmer Mac established a valuation allowance of $86,000 as of both December 31, 2020 and 2019, which was attributable to capital loss carryforwards on investment securities.  Farmer Mac did not establish a valuation allowance for the remainder of its deferred tax assets because it believes it is more likely than not that those deferred tax assets will be realized. As of December 31, 2020, no capital loss carryforwards expired. As of December 31, 2020, the amount of capital loss carryforwards was $0.4 million.  These capital loss carryforwards will expire beginning in 2021.

As of December 31, 2020 and 2019, Farmer Mac did not identify any uncertain tax positions.

Farmer Mac did not have any unrecognized tax benefits for the years ended December 31, 2020, 2019, and 2018.

Tax years 2017 through 2020 remain subject to examination.