ARBOR REALTY TRUST INCABR
ARBOR REALTY TRUST INC Income Taxes Disclosure
Income Taxes
We are organized and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal Revenue Code. A REIT is generally not subject to federal income tax on taxable income which it distributes to its stockholders; provided that it distributes at least 90% of its taxable income and meets certain other requirements. Certain REIT income may be subject to state and local income taxes. We did not have any REIT–federal taxable income, net of dividends paid and net operating loss deductions, for 2025, 2024 and 2023, and therefore, have not provided for REIT federal income tax expense, respectively. In 2025, 2024 and 2023, the REIT incurred no state income tax expense. We have elected to retain excess inclusion income rather than passing it through to our stockholders.
Certain of our assets and operations that would not otherwise comply with the REIT requirements, such as the Agency Business and our residential mortgage banking joint venture (sold in 2025), are owned or conducted through our taxable REIT subsidiaries (the "TRS Consolidated Group"), the majority of the income of which is subject to U.S. federal, state and local income taxes.
The TRS Consolidated Group had no federal net operating losses remaining from prior years. For 2025, 2024 and 2023, we recorded a provision for income taxes related to the assets held in the TRS Consolidated Group and the REIT in the amount of $18.8 million, $13.5 million and $27.3 million, respectively. In 2025 and 2024, there were no changes in valuation allowance. In 2023, the change in valuation allowance previously recorded at the TRS Consolidated Group on the deferred tax assets was released in the amount of $0.3 million.
A summary of our pre-tax GAAP income is as follows ($ in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Pre‑tax GAAP income: | |||||||||||||||||
| REIT | $ | 110,382 | $ | 247,068 | $ | 320,045 | |||||||||||
| TRS Consolidated Group | 66,226 | 50,329 | 107,858 | ||||||||||||||
| Total pre‑tax GAAP income | $ | 176,608 | $ | 297,397 | $ | 427,903 | |||||||||||
Our provision for income taxes is comprised as follows ($ in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax provision: | |||||||||||||||||
| Federal | $ | 10,799 | $ | 18,880 | $ | 26,269 | |||||||||||
| State | 4,207 | 6,211 | 8,427 | ||||||||||||||
| Total | 15,006 | 25,091 | 34,696 | ||||||||||||||
| Deferred tax provision (benefit): | |||||||||||||||||
| Federal | $ | 3,001 | $ | (8,795) | $ | (5,272) | |||||||||||
| State | 772 | (2,818) | (1,783) | ||||||||||||||
| Valuation allowance | — | — | (294) | ||||||||||||||
| Total | 3,773 | (11,613) | (7,349) | ||||||||||||||
| Total income tax expense | $ | 18,779 | $ | 13,478 | $ | 27,347 | |||||||||||
A reconciliation of our effective income tax rate as a percentage of pre-tax income to the U.S. federal statutory rate is as follows ($ in thousands):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. federal statutory rate | $ | 37,924 | 21.0 | % | $ | 62,453 | 21.0 | % | $ | 89,860 | 21.0 | % | |||||||||||||||||||||||
| State and local income taxes, net of federal tax effect (1) | 3,853 | 2.1 | % | 2,707 | 0.9 | % | 5,255 | 1.2 | % | ||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | — | — | (294) | (0.1) | % | ||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| REIT non‑taxable income | (24,017) | (13.3) | % | (51,885) | (17.4) | % | (67,212) | (15.7) | % | ||||||||||||||||||||||||||
| Other | 346 | 0.2 | % | (10) | — | (351) | (0.1) | % | |||||||||||||||||||||||||||
| Other adjustments | 673 | 0.4 | % | 213 | 0.1 | % | 89 | 0.1 | % | ||||||||||||||||||||||||||
| Effective income tax rate | $ | 18,779 | 10.4 | % | $ | 13,478 | 4.6 | % | $ | 27,347 | 6.4 | % | |||||||||||||||||||||||
(1) State taxes in New York, Florida, New Jersey, Massachusetts and Georgia in 2023 and New York, Florida, New Jersey, Massachusetts and Connecticut in 2024 and New York, North Carolina, Florida, Maryland and Georgia in 2025 made up the majority (greater than 50%) of the tax effect in this category.
The significant components of our deferred tax assets and liabilities of our TRS Consolidated Group are as follows ($ in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Expenses not currently deductible | $ | 35,812 | $ | 33,189 | |||||||
| Loan loss reserves | 455 | 7,084 | |||||||||
| Net operating loss carryforwards | 274 | 234 | |||||||||
| Other | 531 | 396 | |||||||||
| Deferred tax assets, net | $ | 37,072 | $ | 40,903 | |||||||
| Deferred tax liabilities: | |||||||||||
| Mortgage servicing rights | $ | 24,878 | $ | 24,420 | |||||||
| Intangibles | 5,255 | 5,106 | |||||||||
| Interest in equity affiliates, net | 904 | 1,568 | |||||||||
| Deferred tax liabilities, net | $ | 31,037 | $ | 31,094 | |||||||
Income taxes paid (net of refund) is comprised as follows ($ in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 19,128 | $ | 19,300 | $ | 22,900 | |||||||||||
| State | 6,595 | 7,807 | 6,849 | ||||||||||||||
| Total | $ | 25,723 | $ | 27,107 | $ | 29,749 | |||||||||||
Jurisdictions with income taxes paid (net of refunds) exceeding 5% of total income taxes paid ($ in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| New York | $ | 599 | $ | 1,991 | $ | 1,837 | |||||||||||
At both December 31, 2025 and 2024, the REIT (excluding the TRS Consolidated Group) had no federal net operating loss carryforwards and no capital loss carryforwards.
At both December 31, 2025 and 2024, the TRS Consolidated Group had no federal net operating loss carryforwards remaining.
At December 31, 2025 and 2024, the TRS Consolidated Group had state net operating loss carryforwards of approximately $0.3 million and $0.2 million, respectively, which will begin to expire in 2036.
The TRS Consolidated Group is currently under audit in certain state and local jurisdictions for tax years 2019 to 2023. While the impact of the current income tax examinations are undetermined, it is not expected to be material to our consolidated financial statements.
We have assessed our tax positions for all open years, which includes 2018 to 2025, and have concluded that there were no material uncertainties to be recognized. We have not recognized any interest and penalties related to tax uncertainties for the years ended 2018 through 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 15, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Mar 3, 2017 | |
| 2015 | Feb 26, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.