Income Taxes
The Company elected on its U.S. federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT. The benefits of the intended REIT conversion on the Company's tax provision and effective income tax rate are reflected in the tables below. As a result of the Tax Cuts and Jobs Act, the corporate tax rate was permanently lowered from the previous maximum rate of 35% to 21%, effective for tax years including or commencing January 1, 2018.
The provision for income taxes charged to operations for years ended December 31, 2025, 2024 and 2023 was as follows:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, | 2025 | | 2024 | | 2023 |
| | (in thousands) |
| Current tax expense | | | | | |
| Federal | $ | — | | | $ | — | | | $ | — | |
| State | 2,229 | | | 2,129 | | | 1,997 | |
| Total current | 2,229 | | | 2,129 | | | 1,997 | |
| Deferred tax (benefit) expense | | | | | |
| Federal | — | | | — | | | — | |
| State | — | | | — | | | — | |
| Total deferred | — | | | — | | | — | |
| Total provision | $ | 2,229 | | | $ | 2,129 | | | $ | 1,997 | |
The following tables reconcile the statutory federal income tax rate to the actual effective income tax rate for the years ended December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, | 2025 | | 2024 | | 2023 |
| Percent of pretax income | | | | | |
| U.S. federal statutory income tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| | | | | |
| State and local income taxes | 0.3 | % | | 0.3 | % | | 0.3 | % |
| Valuation allowance | — | % | | — | % | | — | % |
| | | | | |
| REIT conversion benefit | (21.0) | % | | (21.0) | % | | (21.0) | % |
| Permanent differences | — | % | | — | % | | — | % |
| Other miscellaneous items | — | % | | — | % | | — | % |
| 0.3 | % | | 0.3 | % | | 0.3 | % |
| | | | | | | | | | | | | | | | | | |
| Year ended December 31, | 2025 | | 2024 | | 2023 | |
| | (in thousands) | |
| Amount based upon pretax income | | | | | | |
| U.S. federal statutory income tax | $ | 179,041 | | | $ | 170,053 | | | $ | 159,047 | | |
| | | | | | |
| State and local income taxes | 2,229 | | | 2,129 | | | 1,997 | | |
| Valuation allowance | — | | | — | | | — | | |
| | | | | | |
| REIT conversion benefit | (179,041) | | | (170,053) | | | (159,047) | | |
| | | | | | |
| Permanent differences | — | | | — | | | — | | |
| Other miscellaneous items | — | | | — | | | — | | |
| $ | 2,229 | | | $ | 2,129 | | | $ | 1,997 | | |
The Company is still subject to federal income tax examinations for its years ended December 31, 2022 and forward.
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.