TRANSCONTINENTAL REALTY INVESTORS INCTCI

TRANSCONTINENTAL REALTY INVESTORS INC Income Taxes Disclosure

10-KFiled Mar 12, 20263 min read
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The expense for income taxes consists of:

Year Ended December 31,
202520242023
Current$5,773 $1,930 $1,939 
Deferred1,291 — — 
$7,064 $1,930 $1,939 
The reconciliation between our effective tax rate on income from operations and the statutory rate is as follows:
Year Ended December 31,
202520242023
Income tax expense at federal statutory rate$4,484 $1,776 $1,768 
State and local income taxes net of federal tax benefit1,053 154 171 
Timing differences
Generation (use) of net operating loss carryforwards(488)— — 
Other basis/timing differences
830 — — 
Change in valuation allowance1,185 — — 
Calculated income tax expense$7,064 $1,930 $1,939 
Effective tax rate33.1 %22.8 %22.9 %
We are subject to taxation in the United States and various states.  As of December 31, 2025, our tax years for 2022 through 2025 are subject to examination by the tax authorities.  With few exceptions, as of December 31, 2025, we are no longer subject to U.S federal, state and local examinations by tax authorities for the years before 2022.
Components of the net deferred tax asset:
December 31,
20252024
Basis difference in fixed assets$— $2,333 
Deferred gain and net operating loss carryforward— 122 
$— $2,455 
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Historical Timeline

Fiscal YearFiled
2025Mar 12, 2026Showing above
2024Mar 20, 2025
2023Mar 21, 2024
2022Mar 23, 2023
2021Mar 29, 2022
2020Mar 26, 2021
2019Mar 30, 2020
2018Apr 1, 2019
2017Apr 2, 2018
2016Mar 31, 2017
2015Mar 30, 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.

Other Available Disclosures

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