Capstead REIT and a subsidiary for which the Company has elected taxable REIT subsidiary status file separate tax returns in U.S. federal and state jurisdictions, where applicable. Provided Capstead REIT remains qualified as a REIT and all its taxable income is distributed to stockholders within allowable time limits, no income taxes are due on this income. Accordingly, no provision has been made for income taxes for Capstead REIT. Taxable income, if any, of the Company’s largely dormant taxable REIT subsidiary is fully taxable and provision is made for any resulting income taxes. The Company is no longer subject to examination and the related assessment of tax by federal, state, or local tax authorities for years before 2016.

In 2017 the Tax Cuts and Jobs Act (“Tax Act”) was enacted. Among the significant changes to the Internal Revenue Code, the Tax Act reduces the maximum federal corporate tax rate from 35% to 21% for the tax years after 2017. Accordingly, the Company’s taxable REIT subsidiary has adjusted the balance of its net deferred tax assets and the corresponding valuation allowance.

For tax years after 2017, the Tax Act repealed the corporate Alternative Minimum Tax (“AMT”). AMT credit carryforwards became fully utilizable without limitation or, in the absence of regular tax liability, fully refundable over the next four years. Accordingly, in 2017 the Company’s taxable REIT subsidiary recognized a refund of AMT under the Tax Act in Miscellaneous other revenue (expense) on the Company’s Statements of Operations and recorded a receivable in Receivables and other assets on the Company’s Balance Sheets. In 2018 the Company finalized the recording of the 2017 AMT refund with no change to the 2017 estimated amount.

Additionally, the Tax Act modified the rules for REIT net operating losses (NOL). A REIT NOL carryover can now only offset 80 percent of taxable income for losses arising in years beginning after December 31, 2017. The 80 percent limitation is calculated by multiplying current-year REIT taxable income before the dividends paid deduction by 80 percent. Although there is now an annual NOL limitation, the new rules allow post-2017 NOLs to be carried forward indefinitely.

At December 31, 2019 Capstead REIT has an NOL of $31 million generated in 2019 through the early termination of Derivatives held for hedging purposes. As the NOL was generated after December 31, 2017, it will be subject to the NOL modifications of the Tax Act.

The Company’s effective tax rate differs substantially from statutory federal income tax rates primarily due to the benefit of Capstead REIT’s status as a REIT, along with other items affecting the Company’s effective tax rate as illustrated below for the indicated periods (in thousands):

	Year ended December 31
	2019			2018			2017
Income taxes computed at the federal statutory rate	$	6		$	10,515		$	27,856
Benefit of REIT status		–			(10,512	)		(27,854	)
Income taxes computed on income of the Company's taxable REIT subsidiary		6			3			2
Alternative minimum tax credit refund receivable		–			–			(1,941	)
Change in deferred asset balance due to change in corporate tax rate		–			–			29
Other change in net deferred income tax assets		(6	)		(3	)		(31	)
Income tax (benefit) provision recorded in miscellaneous other revenue (expense)	$	–		$	–		$	(1,941	)

No income taxes were paid during 2019, 2018 or 2017. Capstead REIT had $17.5 million in net capital loss carryforwards that expired at the end of 2019. At December 31, 2019 Capstead has $1.3 million in net capital loss carryforwards. Significant components of the Company’s taxable REIT subsidiary’s deferred income tax assets and liabilities were as follows as of the indicated dates (in thousands):

	December 31
	2019		2018
Deferred income tax assets:
Alternative minimum tax credit	$	–	$	–
Net operating loss carryforwards ^(a)		24		29
Other		10		11
		34		40
Deferred income tax liabilities		–		–
Net deferred tax assets	$	34	$	40
Valuation allowance ^(b)	$	34	$	40