Income Taxes

12 Months Ended

Dec. 31, 2022

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, 2022, 2021, and 2020 were as follows:

Table 10.1

	For the Year Ended December 31,
	2022		2021		2020
	(in thousands)
Current income tax expense	$	35,609	$	38,645	$	32,796
Deferred income tax expense	11,926		(2,273)		(2,489)
Income tax expense	$	47,535	$	36,372	$	30,307

A reconciliation of income tax at the statutory federal corporate income tax rate to the income tax expense for the years ended December 31, 2022, 2021, and 2020 is as follows:

Table 10.2

	For the Year Ended December 31,
	2022			2021			2020
	(dollars in thousands)
Tax expense at statutory rate	$	47,393		$	36,217		$	30,383
Excess tax benefits related to stock-based awards	(401)			(300)			(9)
Other	543			455			(67)
Income tax expense	$	47,535		$	36,372		$	30,307
Statutory tax rate	21.0		%	21.0		%	21.0		%

The components of the deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows:

Table 10.3

	As of December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Basis difference related to hedge items	$	53,360	$	—
Unrealized losses on available-for-sale securities	26,371		—
Allowance for losses	3,603		3,452
Compensation and Benefits	1,639		1,281
Stock-based compensation	1,755		1,462
Basis differences related to financial derivatives	—		64,795
Unrealized losses on cash flow hedges	—		1,427
Basis difference related to structured securitizations	—		35
Capital loss carryforwards	32		32
Valuation allowance	(32)		(32)
Other	1,444		358
Total deferred tax assets	$	88,172	$	72,810
Deferred tax liability:
Basis differences related to financial derivatives	$	49,526	$	—
Unrealized gains on cash flow hedges	12,855		—
Basis difference related to structured securitizations	7,782		—
Basis differences related to hedged items	—		54,446
Unrealized gains on available-for-sale securities	—		2,451
Other	5		44
Total deferred tax liability	$	70,168	$	56,941
Net deferred tax asset	$	18,004	$	15,869

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 $32,000, as of both December 31, 2022 and 2021, 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, 2022, no capital loss carryforwards expired. As of December 31, 2022, the amount of capital loss carryforwards was $0.2 million. These capital loss carryforwards will expire beginning in 2024.

As of December 31, 2022 and 2021, Farmer Mac did not identify any uncertain tax positions.

Farmer Mac did not have any unrecognized tax benefits for the years ended December 31, 2022, 2021, and 2020.

Tax years 2019 through 2022 remain subject to examination.