Income Taxes
Our provision for income taxes consists of the following:
| | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Current: | | | | | |
| Federal | $ | 1,147 | | | $ | — | | | $ | (168) | |
| State | 596 | | | 467 | | | 613 | |
| | 1,743 | | | 467 | | | 445 | |
| Deferred: | | | | | |
| Federal | — | | | — | | | — | |
| State | — | | | — | | | — | |
| | — | | | — | | | — | |
| Income tax provision | $ | 1,743 | | | $ | 467 | | | $ | 445 | |
The table below is a reconciliation of the statutory income tax rate to the effective tax rate for 2025, in accordance with the updated requirements of ASU 2023-09. See Note 2 for further information on the adoption of ASU 2023-09:
| | | | | | | | | | | |
| | For the Year Ended December 31, 2025 |
| | Amount | | Percent |
| Taxes at statutory U.S. federal income tax rate | $ | (59,407) | | | 21 | % |
| Nontaxable income | 60,554 | | | (21.4) | % |
| | | |
State and local income taxes, net of federal tax benefit (1) | 596 | | | (0.2) | % |
| | | |
| | | |
| | | |
| Effective tax rate | $ | 1,743 | | | (0.6) | % |
(1)States taxes in Texas make up a majority (greater than 50%) of the tax effect in this category.
Income taxes paid (net of refunds) for the year ended December 31, 2025 were $1,776, with the majority of payments attributable to Texas state and federal taxes, in the amount of $626 and $1,150, respectively.
As previously disclosed, for the years ended December 31, 2024 and 2023, the following table reconciles the statutory income tax rate to the effective tax rate prior to the adoption of ASU 2023-09:
| | | | | | | | | | | | | |
| | | | For the Year Ended December 31, |
| | | | 2024 | | 2023 |
| Taxes at statutory U.S. federal income tax rate | | | 21.0 | % | | 21.0 | % |
| Nontaxable income | | | (21.0) | % | | (21.0) | % |
| Federal excise tax | | | — | % | | 0.1 | % |
| State and local income taxes, net of federal tax benefit | | | (0.1) | % | | (0.2) | % |
| | | | | |
| | | | | |
| | | | | |
| Effective tax rate | | | (0.1) | % | | (0.1) | % |
Deferred income tax balances reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities in our consolidated balance sheets and the amounts used for income tax purposes and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Significant components of our deferred tax assets
and liabilities were as follows:
| | | | | | | | | | | |
| | For the Year Ended December 31, |
| | 2025 | | 2024 |
| Deferred tax assets: | | | |
| Deferred income | $ | 3,458 | | | $ | 2,388 | |
| | | |
| Fair market value adjustment | (2,053) | | | (1,862) | |
| Other | 1,983 | | | 1,225 | |
| Tax loss carryforwards | 110,013 | | | 102,940 | |
| | 113,401 | | | 104,691 | |
| Valuation allowance | (113,401) | | | (104,691) | |
| | — | | | — | |
| Net deferred income taxes | $ | — | | | $ | — | |
Because of our TRSs' history of losses, we are not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets; thus we have provided a 100% valuation allowance as of December 31, 2025 and 2024. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss). As of December 31, 2025, our consolidated TRSs had net operating loss carry forwards for federal income tax purposes of approximately $424,755, which do not expire. As of December 31, 2025, we, excluding our subsidiaries, had net operating loss carry forwards for federal income tax purposes of approximately $933,931, which do not expire. In the normal course of business, income tax authorities in various income tax jurisdictions conduct routine audits of our income tax returns filed in prior years. Income tax years subsequent to 2021 may be open to examination in some of the income tax jurisdictions in which we operate.
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.