Ready Capital CorpRC
Ready Capital Corp Income Taxes Disclosure
Note 25. Income Taxes
The Company is a REIT pursuant to Internal Revenue Code Section 856. Qualification as a REIT depends on the
Company’s ability to meet various requirements imposed by the Internal Revenue Code, which relate to its
organizational structure, diversity of stock ownership and certain requirements with regard to the nature of its assets and
the sources of its income. As a REIT, the Company generally must distribute annually dividends equal to at least 90% of
its net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income
tax not to apply to earnings that are distributed. To the extent the Company satisfies this distribution requirement but
distributes less than 100% of its net taxable income, it will be subject to U.S. federal income tax on its undistributed
taxable income. In addition, the Company will be subject to a 4% nondeductible excise tax if the actual amount paid to
stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Even if the
Company qualifies as a REIT, it may be subject to certain U.S. federal income and excise taxes and state and local taxes
on its income and assets. If the Company fails to maintain its qualification as a REIT for any taxable year, it may be
subject to material penalties as well as federal, state and local income tax on its taxable income at regular corporate rates
and it would not be able to qualify as a REIT for the subsequent taxable years. As of December 31, 2024 and
December 31, 2023, the Company was in compliance with all REIT requirements.
Certain subsidiaries have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs permit the Company to
participate in certain activities that would not be qualifying income if earned directly by the parent REIT, as long as
these activities meet specific criteria, are conducted within the parameters of certain limitations established by the
Internal Revenue Code and are conducted in entities which elect to be treated as taxable subsidiaries under the Internal
Revenue Code. To the extent these criteria are met, the Company will continue to maintain our qualification as a REIT.
The Company’s TRSs engage in various real estate - related operations, including originating and securitizing
commercial mortgage loans, and investments in real property. Such TRSs are not consolidated for federal income tax
purposes but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred
income taxes is established for the portion of earnings recognized by the Company with respect to its interest in TRSs.
The table below presents the composition of income tax provision.
Year Ended December 31, | |||||
(in thousands) | 2024 | 2023 | 2022 | ||
Current | |||||
Federal income tax | $101 | $1,605 | $6,878 | ||
State and local income tax | (78) | 214 | 1,588 | ||
Net current tax provision | $23 | $1,819 | $8,466 | ||
Deferred | |||||
Federal income tax | (89,584) | 4,314 | 6,976 | ||
State and local income tax | (14,951) | 1,041 | 33 | ||
Net deferred tax provision (benefit) | $(104,535) | $5,355 | $7,009 | ||
Total income tax provision (benefit) | $(104,512) | $7,174 | $15,475 | ||
The table below is a reconciliation of federal income tax determined using the statutory federal tax rate to the reported
income tax provision.
Year Ended December 31, | |||||||
(in thousands) | 2024 | 2023 | |||||
U.S. statutory tax | $(108,467) | 21.0% | $75,268 | 21.0% | |||
State and local income tax | (11,487) | 2.2 | 929 | 0.3 | |||
Income attributable to REIT | 69,971 | (13.5) | (69,019) | (19.3) | |||
Income attributable to non-controlling interests | (718) | 0.1 | (1,789) | (0.5) | |||
Permanent items | (29,508) | 5.7 | 863 | 0.2 | |||
Valuation allowance | (21,085) | 4.1 | — | — | |||
Other | (3,218) | 0.6 | 922 | 0.3 | |||
Effective income tax (benefit) | $(104,512) | 20.2% | $7,174 | 2.0% | |||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and
liabilities are presented net by tax jurisdiction and are reported in other assets and other liabilities, respectively.
The table below presents the tax effects of temporary differences on their respective net deferred tax assets and
liabilities.
Year Ended December 31, | |||
(in thousands) | 2024 | 2023 | |
Deferred tax assets: | |||
Net operating loss carryforwards | $81,883 | $22,153 | |
Accruals | 5,349 | 6,593 | |
Depreciation and amortization | — | 2,913 | |
Goodwill | 16,868 | 17,647 | |
Compensation | 599 | 119 | |
Right of use asset | 1,641 | — | |
Stock Compensation | 997 | — | |
Loan / servicing rights balance | 9,543 | — | |
Other | 642 | 45 | |
Total deferred tax assets | $117,522 | $49,470 | |
Deferred tax liabilities: | |||
Loan / servicing rights balance | — | 50,844 | |
Derivative instruments | — | 56 | |
Other taxable temporary difference | 3,932 | 5,642 | |
Depreciation and amortization | 1,541 | — | |
Unrealized gains | 724 | 4,820 | |
Total deferred tax liabilities | $6,197 | $61,362 | |
Valuation allowance | — | (21,085) | |
Net deferred tax assets (liabilities) | $111,325 | $(32,977) | |
The Company has approximately $300.7 million of federal and $276.0 million of state net operating loss carryforwards
that will begin to expire in 2025.
Additionally, as of December 31, 2024, the Company had federal net operating loss carryforwards of $33.5 million and
capital loss carryforwards of $93.8 million obtained in the Broadmark Merger and the acquisition of Anworth that can be
used to offset future taxable ordinary income and capital gains, respectively. These carryforwards can reduce the
Company's REIT distribution requirements.
The Company recognizes deferred tax assets and liabilities for the future tax consequences arising from differences
between the carrying amounts of existing assets and liabilities under GAAP and their respective tax bases. The Company
evaluates its deferred tax assets for recoverability using a consistent approach which considers the relative impact of
negative and positive evidence, including historical profitability and projections of future taxable income.
The provisions of ASC 740 require that carrying amounts of deferred tax assets be reduced by a valuation allowance if,
based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be
realized As of December 31, 2023, the Company recorded net deferred tax assets of $21.1 million as a result of the
acquisition of Broadmark taxable REIT subsidiary and had a full valuation allowance. This valuation allowance that was
recorded at prior year-end was reversed as of December 31, 2024 as it is more likely than not that these assets will be
realized.
As of December 31, 2024, the Company concluded the positive evidence in favor of the recoverability of its remaining
deferred tax assets outweighed the negative evidence and that it is more likely than not that its remaining deferred tax
assets will be realized. The Company’s framework for assessing the recoverability of deferred tax assets requires it to
weigh all available evidence, including the sustainability of profitability required to realize the deferred tax assets, the
cumulative net income or loss in its consolidated statements of operations in recent years, the future reversals of existing
taxable temporary differences, and the carryforward periods for any carryforwards of net operating losses.
The difference between the statutory rate of 21% and the effective income tax rate is primarily due to income attributable
to the REIT that is offset by the dividends paid deduction.
As of December 31, 2024 and December 31, 2023, the Company had no uncertain tax positions recorded or disclosed in
the financial statements. Additionally, it is the belief of management that the total amount of uncertain tax positions, if
any, will not materially change over the next 12 months.
The Company and its TRSs are subject to taxation in U.S. federal and multiple state and local tax jurisdictions. Federal
tax returns for 2021 and forward are subject to examination. In addition, tax years 2020 and forward remain open in
certain state jurisdictions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 3, 2025 | Showing above |
| 2023 | Feb 28, 2024 | |
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.