Empire State Realty Trust, Inc.ESRT

Empire State Realty Trust, Inc. Income Taxes Disclosure

10-KFiled Mar 2, 20262 min read
Income Taxes
Holdings TRS and Observatory TRS are taxable entities and their consolidated provision for income taxes consisted of the following:
Year Ended December 31,
(amounts in thousands)202520242023
Current:
Federal$(1,016)$(1,044)$(783)
State and local(1,158)(1,368)(695)
Total current(2,174)(2,412)(1,478)
Deferred:
Federal(232)(297)(710)
State and local(152)21 (527)
Total deferred(384)(276)(1,237)
Income tax expense$(2,558)$(2,688)$(2,715)
As of December 31, 2025, we had $103.0 million of NOL carryforwards that may be used in the future to reduce the amount otherwise required to be distributed by ESRT to meet REIT requirements. However, for federal income tax purposes, the NOL will not be able to offset more than 80% of ESRT’s REIT taxable income and may not be able to reduce the amount required to be distributed by ESRT to meet REIT requirements to zero. The federal NOL may be carried forward indefinitely. Other limitations may apply to ESRT’s ability to use its NOL to offset taxable income.
The effective income tax rate reconciliations are presented below:
Year Ended December 31,
2025
(amounts in thousands, except for percentage)AmountPercentage
U.S. federal statutory tax rate$(1,496)21.0 %
State and local income taxes, net of federal income tax effect(1)
(977)13.7 %
Nontaxable or nondeductible items and other adjustments(85)1.2 %
Effective tax rate(2)
$(2,558)35.9 %
(1) State and local taxes in New York made up the majority (greater than 50 percent) of the tax effect in this category.
(2) The effective income tax rate was 34.3% and 44.5% for the years ended December 31, 2024 and 2023, respectively.
The actual tax provision differed from that computed at the federal statutory corporate rate as follows:
Year Ended December 31,
(amounts in thousands)202520242023
Federal tax expense at statutory rate$(1,248)$(1,341)$(1,494)
State income tax expense, net of federal benefit(1,310)(1,347)(1,221)
Income tax expense$(2,558)$(2,688)$(2,715)
We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. As of December 31, 2025 and 2024 the Company had deferred tax assets of $0.9 million, which are included in prepaid expenses and other assets on the consolidated balance sheets. As of December 31, 2025 and 2024 the Company had deferred tax liabilities of $0.7 million and $0.4 million, respectively, which are included in deferred revenue and other liabilities on the consolidated balance sheets.
As of December 31, 2025, 2024 and 2023, the TRS entities have no amount of unrecognized tax benefits. As of December 31, 2025, the tax years ended December 31, 2022 through December 31, 2025 remain open for an audit by the Internal Revenue Service, state or local authorities.

Historical Timeline

Fiscal YearFiled
2025Mar 2, 2026Showing above
2024Feb 28, 2025
2023Feb 28, 2024
2022Feb 28, 2023
2017Feb 28, 2018
2015Feb 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.

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