Summit Hotel Properties, Inc.INN
Summit Hotel Properties, Inc. Income Taxes Disclosure
INCOME TAXES
We have elected to be taxed as a REIT. As a REIT, we are generally not subject to corporate level income taxes on taxable income we distribute to our stockholders. We have met the annual REIT distribution requirement by distribution of at least 90% of our taxable income to our stockholders.
Income related to our TRSs is subject to federal, state and local taxes at applicable corporate tax rates. Our consolidated tax provision includes the income tax provision related to the operations of the TRSs as well as state and local income taxes related to the Operating Partnership.
The components of income tax expense (benefit) are as follows (in thousands):
For the Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | — | $ | 989 | $ | 1,151 | ||||||||||||||
| State and local | 1,173 | 1,567 | 1,563 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | (322) | (8,879) | 84 | |||||||||||||||||
| State and local | (9) | (2,420) | — | |||||||||||||||||
| Income tax expense (benefit) | $ | 842 | $ | (8,743) | $ | 2,798 | ||||||||||||||
We have prospectively adopted the disclosure requirements as required after the adoption of ASU 2023-09. Below is a reconciliation between the provision for income taxes and the amounts computed by applying the federal statutory income tax rate to the income or loss before taxes (in thousands) for the year ended December 31, 2025:
| Amount | Percent | |||||||||||||
| US federal statutory tax rate | $ | (2,276) | 21.0 | % | ||||||||||
State and local income taxes, net of federal income tax effect (1) | 920 | (8.5) | ||||||||||||
| Effect of changes in tax laws or rates enacted in current period | 512 | (4.7) | ||||||||||||
| Changes in valuation allowance | 96 | (0.9) | ||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||
| Nontaxable loss of the REITs | 644 | (5.9) | ||||||||||||
| Share based compensation | 155 | (1.4) | ||||||||||||
| Other permanent differences | 68 | (0.6) | ||||||||||||
| Other adjustments: | ||||||||||||||
| Capital contribution from consolidated entity to a TRS | 723 | (6.7) | ||||||||||||
Income tax expense and effective tax rate | $ | 842 | (7.8) | % | ||||||||||
(1) State taxes in Texas made up the majority (greater than 50 percent) of the tax effect in this category
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows (in thousands):
For the Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statutory federal income tax provision | $ | 6,331 | $ | (5,317) | ||||||||||
| Nontaxable (income) loss of the REITs | (6,260) | 4,563 | ||||||||||||
| State income taxes, net of federal tax benefit | 1,467 | 1,158 | ||||||||||||
| Provision to return and deferred adjustment | 20 | 50 | ||||||||||||
| Effect of permanent differences and other | 431 | 235 | ||||||||||||
| Reversal of federal deferred tax valuation allowance | (9,905) | — | ||||||||||||
| Reversal of state deferred tax valuation allowance, net of federal benefit | (2,156) | — | ||||||||||||
| Other change in valuation allowance | 1,329 | 2,109 | ||||||||||||
| Income tax (benefit) expense | $ | (8,743) | $ | 2,798 | ||||||||||
The Company evaluates its deferred tax assets each reporting period to determine if it is more-likely-than-not that those assets will be realized. In its evaluation, the Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the Company’s existing deferred tax assets.
At December 31, 2025 and 2024, we had valuation allowances of $2.7 million and $2.6 million, respectively. In the fourth quarter of 2024, we determined that it was probable that we would realize the carrying amount of most of our deferred tax assets. As such, we released a substantial portion of our valuation allowance totaling $12.1 million, which resulted in a benefit for income taxes for the year ended December 31, 2024.
Deferred tax assets are included in Other assets and deferred tax liabilities are included in Accrued expenses and other in the accompanying Consolidated Balance Sheets.
Significant components of our TRSs deferred tax assets (liabilities) are as follows (in thousands):
December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Tax carryforwards | $ | 12,786 | $ | 11,916 | ||||||||||
| Accrued expenses | 1,040 | 1,515 | ||||||||||||
| Other | 479 | 445 | ||||||||||||
Total | 14,305 | 13,876 | ||||||||||||
| Valuation allowance | (2,678) | (2,581) | ||||||||||||
Net deferred tax asset | $ | 11,627 | $ | 11,295 | ||||||||||
| Gross deferred tax assets | $ | 14,310 | $ | 13,881 | ||||||||||
| Gross deferred tax liabilities | (5) | (5) | ||||||||||||
| Valuation allowance | (2,678) | (2,581) | ||||||||||||
Net deferred tax asset | $ | 11,627 | $ | 11,295 | ||||||||||
At December 31, 2025, our TRSs had federal net operating losses of $52.5 million which are not subject to expiration and state net operating losses of $35.3 million, which expire beginning in 2028. At December 31, 2025, Summit Hotel Properties Inc. and our Subsidiary REITs had federal net operating loss carryforwards of $40.9 million and $8.6 million, respectively, which are not subject to expiration.
In the normal course of business, we are subject to examination by federal, state, and local jurisdictions where applicable. We had no unrecognized tax benefits at December 31, 2025 or in the three-year period then ended. We expect no significant increase or decrease in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2025. We have no material interest or penalties relating to unrecognized tax benefits in the Consolidated Statements of Operations for the years ended December 31, 2025, 2024 or 2023 or in the Consolidated Balance Sheets as of December 31, 2025 or 2024.
We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. In general, we are not subject to tax examinations by tax authorities for years before 2022.
Income taxes paid by jurisdiction for the year ended December 31, 2025 are as follows (in thousands):
| Amount | ||||||||
| Federal refunds, net of payments | $ | (138) | ||||||
States, net of refunds (1) | 1,229 | |||||||
| Total cash payments for income taxes, net of refunds | $ | 1,091 | ||||||
(1) Individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for the year ended December 31, 2025 include Texas at $1.0 million, and Oregon at $0.2 million.
Characterization of Dividends and Distributions (Unaudited)
For income tax purposes, distributions paid consist of ordinary income and capital gains or a combination thereof. For the years ended December 31, 2025, 2024 and 2023 distributions paid per share were characterized as follows:
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||
| Ordinary non-qualified dividend income | $ | 0.1272 | 39.74 | % | $ | 0.2879 | 95.96 | % | $ | 0.1940 | 88.19 | % | ||||||||||||||||||||||||||
| Ordinary qualified dividend income | — | — | % | 0.0121 | 4.04 | % | 0.0078 | 3.54 | % | |||||||||||||||||||||||||||||
| Return of capital | 0.1928 | 60.26 | % | — | — | % | 0.0182 | 8.27 | % | |||||||||||||||||||||||||||||
| Total | $ | 0.3200 | 100.00 | % | $ | 0.3000 | 100.00 | % | $ | 0.2200 | 100.00 | % | ||||||||||||||||||||||||||
| Preferred Stock - Series E | ||||||||||||||||||||||||||||||||||||||
| Ordinary non-qualified dividend income | $ | 0.6210 | 39.74 | % | $ | 1.4994 | 95.96 | % | $ | 1.3779 | 88.19 | % | ||||||||||||||||||||||||||
| Ordinary qualified dividend income | — | — | % | 0.0631 | 4.04 | % | 0.0553 | 3.54 | % | |||||||||||||||||||||||||||||
| Return of capital | 0.9415 | 60.26 | % | — | — | % | 0.1293 | 8.27 | % | |||||||||||||||||||||||||||||
| Total | $ | 1.5625 | 100.00 | % | $ | 1.5625 | 100.00 | % | $ | 1.5625 | 100.00 | % | ||||||||||||||||||||||||||
| Preferred Stock - Series F | ||||||||||||||||||||||||||||||||||||||
| Ordinary non-qualified dividend income | $ | 0.5837 | 39.74 | % | $ | 1.4095 | 95.96 | % | $ | 1.2952 | 88.19 | % | ||||||||||||||||||||||||||
| Ordinary qualified dividend income | — | — | % | 0.0593 | 4.04 | % | 0.0520 | 3.54 | % | |||||||||||||||||||||||||||||
| Return of capital | 0.8850 | 60.26 | % | — | — | % | 0.1215 | 8.27 | % | |||||||||||||||||||||||||||||
| Total | $ | 1.4687 | 100.00 | % | $ | 1.4688 | 100.00 | % | $ | 1.4687 | 100.00 | % | ||||||||||||||||||||||||||
Ordinary non-qualified dividends are eligible for the 20% deduction provided by Section 199A of the IRC.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 24, 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.