INCOME TAX

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAX

INCOME TAX

    The Company wholly owns ACRC Lender W TRS LLC, which is a taxable REIT subsidiary (“TRS”) formed to issue and hold certain loans intended for sale. The Company also wholly owns ACRC 2017-FL3 TRS LLC, which is a TRS formed to hold a portion of the FL3 CLO Securitization and FL4 CLO Securitization (as defined below), including the portion that generates excess inclusion income. Additionally, the Company wholly owns ACRC WM Tenant LLC, which is a TRS formed to lease from an affiliate the hotel property classified as real estate owned acquired on March 8, 2019. ACRC WM Tenant LLC engaged a third-party hotel management company to operate the hotel under a management contract.

The income tax provision for the Company and the TRSs consisted of the following for the three and nine months ended September 30, 2021 and 2020 ($ in thousands):

	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020
Current	$	(35)	$	76	$	437	$	179
Deferred	—		—		—		(99)
Excise tax	35		105		156		270
Total income tax expense, including excise tax	$	—	$	181	$	593	$	350

    For the three and nine months ended September 30, 2021, the Company incurred an expense of $35 thousand and $156 thousand, respectively, for U.S. federal excise tax. For the three and nine months ended September 30, 2020, the Company incurred an expense of $105 thousand and $270 thousand, respectively, for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the calendar year (including any distribution declared in the fourth quarter and paid following January) plus any prior year shortfall. If it is determined that an excise tax liability exists for the current year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The quarterly expense is calculated in accordance with applicable tax regulations.

The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.

As of September 30, 2021, tax years 2017 through 2021 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.