Cherry Hill Mortgage Investment CorpCHMI
Cherry Hill Mortgage Investment Corp Income Taxes Disclosure
Note 15 — Income Taxes
The Company elected to be taxed as a REIT under Code Sections 856 through 860 beginning with its short taxable year ended December 31, 2013. As a REIT,
the Company generally will not be subject to U.S. federal income tax to the extent that it distributes its taxable income to its stockholders. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its
stockholder composition. It is the Company’s policy to distribute all or substantially all of its REIT taxable income. To the extent there is any undistributed REIT taxable income at the end of a year, the Company can elect to distribute such
shortfall within the next year as permitted by the Code.
Effective January 1, 2014, CHMI Solutions elected to be taxed as a corporation for U.S. federal income tax purposes; prior to this date, CHMI Solutions
was a disregarded entity for U.S. federal income tax purposes. CHMI Solutions has jointly elected with the Company, the ultimate beneficial owner of CHMI Sub-REIT, to be treated as a TRS of the Company, and all activities conducted through Solutions
and its wholly-owned subsidiary, Aurora, are subject to federal and state income taxes. CHMI Solutions files a consolidated tax return with Aurora and is fully taxed as a U.S. C-Corporation.
The state and local tax jurisdictions for which the Company is subject to tax filing obligations recognize the Company’s status as a REIT, and therefore,
the Company generally does not pay income tax in such jurisdictions. Solutions and Aurora are subject to U.S. federal, state and local income taxes. All of the Company’s pre-tax book income is from U.S. domestic sources.
The components of the Company’s income tax expense (benefit) are as follows for the periods indicated below (dollars in thousands):
|
Year Ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Deferred federal income tax expense
|
$ |
3,623
|
$ |
280
|
$ |
4,116
|
||||||
|
Deferred state income tax expense
|
479
|
243
|
954
|
|||||||||
|
Provision for Corporate Business Taxes
|
$
|
4,102
|
$
|
523
|
$
|
5,070
|
||||||
The following is a reconciliation of the statutory federal rate to the effective rate, for the periods indicated below (dollars in thousands):
|
Year Ended December 31,
|
||||||||||||||||||||||||
|
2024
|
2023
|
2022
|
||||||||||||||||||||||
|
Computed income tax expense (benefit) at federal rate
|
$
|
3,425
|
21.0
|
%
|
$
|
(7,336
|
)
|
21.0
|
%
|
$
|
5,724
|
21.0
|
%
|
|||||||||||
|
State tax expense, net of federal tax, if applicable
|
379
|
2.3
|
%
|
30
|
(0.1
|
)%
|
494
|
1.8
|
%
|
|||||||||||||||
|
Tax provision due to state tax rate change
|
-
|
-
|
% |
206
|
(0.6
|
)%
|
329
|
1.2
|
%
|
|||||||||||||||
|
Permanent differences in taxable income from GAAP pre-tax income
|
1 | - | % | - | - | % | - | - | % | |||||||||||||||
|
Provision to return adjustment
|
(5
|
)
|
-
|
% |
(7
|
)
|
-
|
% |
(7
|
)
|
- | % | ||||||||||||
|
REIT income not subject to tax expense (benefit)
|
302
|
1.9
|
%
|
7,630
|
(21.8
|
)%
|
(1,470
|
)
|
(5.4
|
)%
|
||||||||||||||
|
Provision for Corporate Business Taxes/Effective Tax Rate(A)
|
$
|
4,102
|
25.2
|
%
|
$
|
523
|
(1.5
|
)%
|
$
|
5,070
|
18.6
|
%
|
||||||||||||
| (A) |
The provision for income taxes is recorded at
the TRS level.
|
The Company’s consolidated balance sheets
contain the following income taxes recoverable and deferred tax assets, which are recorded at the TRS level (dollars in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
|
Deferred tax assets (liabilities)
|
||||||||
|
Deferred tax - mortgage
servicing rights
|
$
|
(6,907
|
)
|
$
|
(1,789
|
)
|
||
|
Deferred tax - net operating
loss
|
17,828
|
16,811
|
||||||
|
Total net deferred tax assets
|
$
|
10,921
|
$
|
15,022
|
||||
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. The Company had net operating losses (“NOLs”) of $77.0 million as of December 31, 2024, which were created subsequent to 2017 and can be carried forward indefinitely. As of December 31, 2024, the Company believes it is more
likely than not that it will fully realize its deferred tax assets. Deferred tax assets are included in “Receivables and other assets” in the consolidated balance sheets.
Based on the Company’s evaluation, the Company has concluded that there are no significant liabilities for unrecognized tax benefits required to be
reported in the Company’s consolidated financial statements. Additionally, there were no amounts accrued for penalties or interest as of or during the periods presented in these consolidated financial statements.
The Company’s 2023, 2022 and 2021 federal, state and local income tax returns remain open for examination by the relevant authorities.
Distributions to stockholders generally will be primarily taxable as ordinary income, although a portion of such distributions may be designated as
qualified dividend income or may constitute a return of capital. The Company furnishes annually to each stockholder a statement setting forth distributions paid during the preceding year and their U.S. federal income tax treatment.
Common Stock distributions for the years indicated below were taxable as follows:
|
Year Ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Dividends per share
|
$
|
0.60
|
(A) |
$
|
0.84
|
(B) |
$
|
1.08
|
(C) | |||
|
Ordinary income
|
50
|
%
|
95
|
% |
60
|
%
|
||||||
|
Long-term capital gain
|
-
|
% |
-
|
% |
-
|
% |
||||||
|
Return of capital
|
50
|
%
|
5
|
%
|
40
|
%
|
||||||
| (A) |
The entire $0.15 per share dividend declared in and paid in is treated as received by stockholders in 2025
|
| (B) |
The entire $0.15 per share dividend declared in and paid in is treated as received by stockholders in 2024
|
| (C) |
The entire $0.27 per share dividend declared in and paid in is treated as received by stockholders in 2023
|
Series A Preferred Stock distributions for the years indicated below were taxable as follows:
|
Year Ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Dividends per share
|
$
|
2.05
|
(A) |
$
|
2.05
|
(B) |
$
|
2.05
|
(C) | |||
|
Ordinary income
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
|
Long-term capital gain
|
-
|
% |
-
|
% |
-
|
% | ||||||
| Return of capital | - | % |
- | % |
- | % |
||||||
| (A) |
The entire $0.51 per share dividend declared in and paid in is treated as received by stockholders in 2025
|
| (B) |
The entire $0.51 per share dividend declared in and paid in is treated as received by stockholders in 2024
|
| (C) |
The entire $0.51 per share dividend declared in and paid in is treated as received by stockholders in 2023
|
Series B Preferred Stock distributions for the years indicated below were taxable as follows:
|
Year Ended December 31,
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
| Dividends per share |
$ | 2.46 | (A) | $ | 2.06 | (B) | $ | 2.06 | (C) | |||
|
Ordinary income
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
|
Long-term capital gain
|
-
|
% |
-
|
% |
-
|
% | ||||||
| Return of capital | - | % |
- | % |
- | % |
||||||
| (A) |
The entire $0.67 per share dividend declared in and paid in is treated as received by stockholders in 2025
|
| (B) |
The entire $0.52 per share dividend declared in and paid in is treated as received by stockholders in 2024
|
| (C) |
The entire $0.52 per share dividend declared in and paid in is treated as received by stockholders in 2023
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 6, 2025 | Showing above |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 15, 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.