Pebblebrook Hotel TrustPEB
Pebblebrook Hotel Trust Income Taxes Disclosure
Income Taxes
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The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90 percent of its REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders. It is the Company's current intention to adhere to these requirements and maintain the Company's qualification for taxation as a REIT. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders. However, as a REIT, the Company is still subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income of TRSs, including our TRS lessees, are subject to federal, state and local income taxes.
For federal income tax purposes, the cash distributions paid to the Company's common shareholders and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains. Tax law permits certain characterization of distributions which could result in differences between cash basis and tax basis distribution amounts.
The following characterizes distributions paid per common share and preferred share on a tax basis for the years ended December 31, 2025, 2024 and 2023:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Common Shares: | |||||||||||||||||||||||||||||||||||
| Ordinary non-qualified income | $ | — | — | % | $ | — | — | % | $ | 0.0400 | 100.00 | % | |||||||||||||||||||||||
| Qualified dividend | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Capital gain | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 0.0400 | 100.00 | % | 0.0300 | 100.00 | % | — | — | % | ||||||||||||||||||||||||||
| Total | $ | 0.0400 | 100.00 | % | $ | 0.0300 | 100.00 | % | $ | 0.0400 | 100.00 | % | |||||||||||||||||||||||
| Series E Preferred Shares: | |||||||||||||||||||||||||||||||||||
| Ordinary non-qualified income | $ | — | — | % | $ | 0.9786 | 81.87 | % | $ | 1.5938 | 100.00 | % | |||||||||||||||||||||||
| Qualified dividend | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Capital gain | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 1.5938 | 100.00 | % | 0.2167 | 18.13 | % | — | — | % | ||||||||||||||||||||||||||
| Total | $ | 1.5938 | 100.00 | % | $ | 1.1953 | 100.00 | % | $ | 1.5938 | 100.00 | % | |||||||||||||||||||||||
| Series F Preferred Shares: | |||||||||||||||||||||||||||||||||||
| Ordinary non-qualified income | $ | — | — | % | $ | 0.9671 | 81.87 | % | $ | 1.5750 | 100.00 | % | |||||||||||||||||||||||
| Qualified dividend | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Capital gain | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 1.5750 | 100.00 | % | 0.2142 | 18.13 | % | — | — | % | ||||||||||||||||||||||||||
| Total | $ | 1.5750 | 100.00 | % | $ | 1.1813 | 100.00 | % | $ | 1.5750 | 100.00 | % | |||||||||||||||||||||||
| Series G Preferred Shares: | |||||||||||||||||||||||||||||||||||
| Ordinary non-qualified income | $ | — | — | % | $ | 0.9786 | 81.87 | % | $ | 1.5938 | 100.00 | % | |||||||||||||||||||||||
| Qualified dividend | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Capital gain | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 1.5938 | 100.00 | % | 0.2167 | 18.13 | % | — | — | % | ||||||||||||||||||||||||||
| Total | $ | 1.5938 | 100.00 | % | $ | 1.1953 | 100.00 | % | $ | 1.5938 | 100.00 | % | |||||||||||||||||||||||
| Series H Preferred Shares: | |||||||||||||||||||||||||||||||||||
| Ordinary non-qualified income | $ | — | — | % | $ | 0.8750 | 81.87 | % | $ | 1.4250 | 100.00 | % | |||||||||||||||||||||||
| Qualified dividend | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Capital gain | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 1.4250 | 100.00 | % | 0.1938 | 18.13 | % | — | — | % | ||||||||||||||||||||||||||
| Total | $ | 1.4250 | 100.00 | % | $ | 1.0688 | 100.00 | % | $ | 1.4250 | 100.00 | % | |||||||||||||||||||||||
The common and preferred distributions declared on December 15, 2022 and paid on January 17, 2023 were treated as 2022 distributions for tax purposes.
The common and preferred distributions declared on December 15, 2023 and paid on January 16, 2024 were treated as 2023 distributions for tax purposes.
The common and preferred distributions declared on December 15, 2024 and paid on January 15, 2025 were treated as 2025 distributions for tax purposes.
The common and preferred distributions declared on December 15, 2025 and paid on January 15, 2026 will be treated as 2026 distributions for tax purposes.
The Company's provision (benefit) for income taxes consists of the following (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 1,273 | $ | 1,197 | $ | 237 | |||||||||||
| State and local | 821 | 1,658 | 418 | ||||||||||||||
| Total current provision | $ | 2,094 | $ | 2,855 | $ | 655 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | 4,068 | (25,280) | — | ||||||||||||||
| State and local | 129 | (3,203) | — | ||||||||||||||
| Total deferred provision (benefit) | $ | 4,197 | $ | (28,483) | $ | — | |||||||||||
| Income tax expense (benefit) | $ | 6,291 | $ | (25,628) | $ | 655 | |||||||||||
A reconciliation of the U.S. federal statutory rate and the Company's effective tax rate is as follows (in thousands):
| For the year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | (11,747) | 21.0 | % | $ | (5,379) | 21.0 | % | $ | 16,808 | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 704 | (1.3) | % | (1,829) | 7.1 | % | 409 | 0.5 | % | ||||||||||||||||||||||||||
| Effect of changes in tax law or rates enacted in the current period | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Tax credits | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Changes in valuation allowance | 779 | (1.4) | % | (28,368) | 110.8 | % | 973 | 1.2 | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| REIT income not subject to tax | 16,390 | (29.3) | % | 9,800 | (38.3) | % | (16,536) | (20.7) | % | ||||||||||||||||||||||||||
| Other | 168 | (0.3) | % | 178 | (0.7) | % | 97 | 0.1 | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other adjustments: | |||||||||||||||||||||||||||||||||||
| Deferred adjustment for investment in subsidiary | — | — | % | — | — | % | (1,104) | (1.4) | % | ||||||||||||||||||||||||||
| Miscellaneous | (3) | — | % | (30) | 0.1 | % | 8 | — | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 6,291 | (11.3) | % | $ | (25,628) | 100.0 | % | $ | 655 | 0.7 | % | |||||||||||||||||||||||
______________________
(1) The following states made up the majority of the tax effect: California and Massachusetts in 2025, 2024 and 2023.
The Company paid income taxes or received income tax refunds of the following (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal | $ | 578 | $ | 465 | $ | (2,911) | |||||||||||
| U.S. state and local: | |||||||||||||||||
| California | 894 | 1,515 | * | ||||||||||||||
| Florida | * | 221 | * | ||||||||||||||
| Illinois | 103 | 260 | 222 | ||||||||||||||
| Philadelphia | (170) | * | * | ||||||||||||||
| Others | 9 | 123 | 140 | ||||||||||||||
| Total U.S. state and local | $ | 836 | $ | 2,119 | $ | 362 | |||||||||||
| Total income taxes paid (refunded) | $ | 1,414 | $ | 2,584 | $ | (2,549) | |||||||||||
* The amount of income taxes paid during the year did not meet the 5% disaggregation threshold.
The significant components of the Company's deferred tax assets as of December 31, 2025 and 2024 consisted of the following (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Net operating loss carryover | $ | 28,443 | $ | 34,125 | |||||||
| State taxes and other | 10,000 | 7,671 | |||||||||
| Depreciation | 14 | 31 | |||||||||
| Total deferred tax asset before valuation allowance | $ | 38,457 | $ | 41,827 | |||||||
| Valuation allowance | (14,171) | (13,344) | |||||||||
| Deferred tax asset net of valuation allowance | $ | 24,286 | $ | 28,483 | |||||||
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 or if a valuation allowance is needed. In 2024, due to the TRS no longer having a three-year cumulative loss and continued improvement in the Company's financial results coming out of the COVID-19 pandemic and the projected future taxable income of its TRS, the Company released a portion of its federal and state valuation allowance. The change in the valuation allowance was a $0.8 million increase in 2025 and a $31.7 million decrease in 2024. The Company has provided a valuation allowance against a portion of its state deferred tax assets at December 31, 2025 due to the uncertainty of realizing the loss in future years. The Company's federal net operating loss can be carried forward indefinitely.
As of December 31, 2025 and 2024, the Company had no material unrecognized tax benefits. As a policy, the Company recognizes penalties and interest accrued related to unrecognized tax benefits as a component of income tax expense, however, there are currently no such accruals. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. Due to the net operating loss carryforward, tax years 2020 through 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 22, 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.