ANNALY CAPITAL MANAGEMENT INCNLY
ANNALY CAPITAL MANAGEMENT INC Income Taxes Disclosure
17. INCOME TAXES | ||
To the extent there is any undistributed REIT taxable income at the end of a year, the Company distributes such shortfall within the next year as permitted by the Code.
The Company and certain of its direct and indirect subsidiaries, including Annaly TRS, Inc. and certain subsidiaries of joint ventures, have made separate joint elections to treat these subsidiaries as TRSs. As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon their taxable income.
The provisions of ASC 740, Income Taxes (“ASC 740”), clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on a tax return. ASC 740 also requires that interest and penalties related to unrecognized tax benefits be recognized in the financial statements. As of December 31, 2025, the Company does not have any unrecognized tax benefits that would affect its financial position. Thus, no accruals for penalties and interest were deemed necessary at December 31, 2025 and 2024.
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. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise or business taxes. The Company’s TRSs are subject to federal, state and local taxes. The Company’s federal, state and local tax returns from 2022 and forward remain open for examination.
During the years ended December 31, 2025, 2024 and 2023 the Company recorded ($6.9) million, $15.3 million and $39.4 million, respectively, of income tax expense (benefit) attributable to its TRSs. Income tax expense (benefit) consists of the following:
| For the Years Ended | |||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Current Tax Expense (Benefit) | |||||||||||||||||
| Federal | $ | (131) | $ | 771 | $ | — | |||||||||||
| State and local | 175 | 240 | 28 | ||||||||||||||
| Total current income tax expense (benefit) | $ | 44 | $ | 1,011 | $ | 28 | |||||||||||
| Deferred Tax Expense (Benefit) | |||||||||||||||||
| Federal | $ | (6,313) | $ | 12,468 | $ | 34,480 | |||||||||||
| State and local | (601) | 1,781 | 4,926 | ||||||||||||||
| Total deferred income tax expense (benefit) | $ | (6,914) | $ | 14,249 | $ | 39,406 | |||||||||||
| Total income tax expense (benefit) | $ | (6,870) | $ | 15,260 | $ | 39,434 | |||||||||||
The difference between the Company's reported income tax provision and the statutory rate of 21.0% is as follows:
| For the Year Ended | |||||||||||
| December 31, 2025 | |||||||||||
| (dollars in thousands) | Percent | ||||||||||
| Statutory federal income tax rate | $ | 429,277 | 21.0 | % | |||||||
| Non-taxable REIT income | (396,950) | (19.4 | %) | ||||||||
State and local taxes, net of federal income tax effect (1) | (3,509) | (0.2 | %) | ||||||||
| VIE and Other | (35,688) | (1.7 | %) | ||||||||
| Change in valuation allowance | — | — | % | ||||||||
| Total provision | $ | (6,870) | (0.3 | %) | |||||||
(1) State and local taxes in New York made up the majority (greater than 50%) of the tax effect in this category. | |||||||||||
| For the Years Ended | |||||||||||
| December 31, 2024 | December 31, 2023 | ||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| Non-taxable REIT income | (22.5 | %) | (25.2 | %) | |||||||
| State and local taxes | 3.0 | % | 3.0 | % | |||||||
| VIE and Other | — | % | (1.3 | %) | |||||||
| Change in valuation allowance | — | % | — | % | |||||||
| Total provision | 1.5 | % | (2.5 | %) | |||||||
During the year ended December 31, 2025, the Company paid $0.7 million of income taxes (net of refunds). Income taxes paid (net of refunds) consists of the following:
| For the Year Ended | |||||
| December 31, 2025 | |||||
| (dollars in thousands) | |||||
| Federal | 183 | ||||
| State and local | 492 | ||||
| Total income taxes paid (net of refunds) | $ | 675 | |||
As of December 31, 2025, the Company recorded a net deferred tax asset of $89.2 million resulting primarily from net operating loss carryforwards and securitization gains, and a net deferred tax liability of $151.3 million resulting primarily from unrealized gains on MSR, residential mortgage loans, and interest rate swaps, which is included in Other assets and Other liabilities, respectively, in the Consolidated Statements of Financial Condition. As of December 31, 2025, no valuation allowance was established.
As of December 31, 2025, the Company's TRSs had approximately $109.1 million of net operating loss carryforwards for federal income tax purposes which may be available to offset future taxable income, including approximately $7.9 million of net operating loss carryforwards that are subject to an annual limitation under Internal Revenue Code Section 382 and $101.2 million that can be carried forward indefinitely.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 15, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 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.