ACRES Commercial Realty Corp. Income Taxes Disclosure
NOTE 21 - INCOME TAXES
The following table details the components of income taxes at the Company’s TRSs (in thousands):
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|
Years Ended December 31, |
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|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Income tax (benefit) expense: |
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|
|
|
|
|
|
|
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
(1 |
) |
|
|
1 |
|
|
|
13 |
|
Total current |
|
|
(1 |
) |
|
|
1 |
|
|
|
13 |
|
Deferred: |
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|
|
|
|
|
|
|
|
|||
Federal |
|
|
— |
|
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total deferred |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
(1 |
) |
|
$ |
1 |
|
|
$ |
13 |
|
A reconciliation of the income tax expense based upon the statutory tax rate to the effective income tax rate was as follows for the Company’s TRSs for the years presented (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Income tax (benefit) expense: |
|
|
|
|
|
|
|
|
|
|||
Statutory tax |
|
$ |
(39 |
) |
|
$ |
(70 |
) |
|
$ |
(178 |
) |
State and local taxes, net of federal benefit |
|
|
1,062 |
|
|
|
(42 |
) |
|
|
313 |
|
True-up of prior period tax expense |
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
Valuation allowance |
|
|
(757 |
) |
|
|
310 |
|
|
|
(64 |
) |
Other items |
|
|
(267 |
) |
|
|
(191 |
) |
|
|
(58 |
) |
Total |
|
$ |
(1 |
) |
|
$ |
1 |
|
|
$ |
13 |
|
The components of deferred tax assets and liabilities were as follows for the Company’s TRSs (in thousands):
|
|
December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Deferred tax assets related to: |
|
|
|
|
|
|
||
Federal, state and local loss carryforwards |
|
$ |
13,794 |
|
|
$ |
13,924 |
|
Amortization of intangibles |
|
|
25 |
|
|
|
35 |
|
Capital loss carryforward |
|
|
255 |
|
|
|
288 |
|
Equity investments |
|
|
5,116 |
|
|
|
5,874 |
|
Interest expense limitation 163(j) |
|
|
1,365 |
|
|
|
1,035 |
|
Total deferred tax assets |
|
|
20,555 |
|
|
|
21,156 |
|
Valuation allowance |
|
|
(20,551 |
) |
|
|
(21,102 |
) |
Total deferred tax assets, net of valuation allowance |
|
$ |
4 |
|
|
$ |
54 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities related to: |
|
|
|
|
|
|
||
Unrealized gains |
|
$ |
— |
|
|
$ |
(50 |
) |
Accrued expenses |
|
|
(4 |
) |
|
|
(4 |
) |
Total deferred tax liabilities |
|
$ |
(4 |
) |
|
$ |
(54 |
) |
|
|
|
|
|
|
|
||
Deferred tax assets, net |
|
$ |
— |
|
|
$ |
— |
|
At December 31, 2024 and 2023, the Company had $60.9 million and $60.2 million, respectively, of gross federal and $1.3 million and $1.6 million, respectively, of gross state and local net operating loss ("NOL") carryforwards (a collective deferred tax asset of $13.8 million and $13.9 million, respectively). At December 31, 2024, $21.1 million of the NOL carryforwards have an indefinite carryforward period and $39.8 million of the NOL carryforwards begin to expire in 2044.
The Company also generated a gross capital loss carryforward of $1.0 million (tax effected expense of $203,000 at December 31, 2024) in 2021 and 2020. Due to changes in management’s focus regarding the non-core asset classes, the Company determined that it no longer expected to have sufficient forecasted taxable income to completely realize the tax benefits of the deferred tax assets at December 31, 2024 and 2023. Therefore, a full valuation allowance with a tax effected expense of $20.6 million and $21.1 million has been recorded against the net deferred tax asset at December 31, 2024 and 2023, respectively. Management will continue to assess its estimate of the amount of deferred tax assets that the Company will be able to utilize.
The Company is subject to examination by the Internal Revenue Service for calendar years including and subsequent to 2021, and is subject to examination by state and local jurisdictions for calendar years including and subsequent to 2021.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 17, 2025 | Showing above |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 10, 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.