INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

15. INCOME TAXES

The Company has elected to be taxed as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distributes at least 90% of its taxable income to its stockholders. As a REIT, the Company generally will not be subject to corporate level federal income tax on net income that is currently distributed to stockholders.

The Company has wholly-owned TRS’s which are subject to federal and state income taxes. The income generated from the TRS’s is taxed at normal corporate rates.

The provision for income taxes results in effective tax rates that differ from federal and state statutory rates. A reconciliation of the provision for income tax attributable to the TRSs’ income from continuing operations computed at federal statutory rates to the income tax provision reported in the financial statements is as follows:

	Year Ended December 31,
	2021		2020
	(in thousands)
(Loss) income from continuing operations before income taxes for TRSs	$	9,242	$	(7,995)
Expected federal income tax (benefit) provision	$	1,941	$	(1,679)
State income taxes	(40)		(1,562)
Change in valuation allowance	(273)		2,605
Other	1,364		(86)
Income tax (benefit) provision	$	2,992	$	(722)

The components of the Company’s net deferred tax asset, which are included in other assets, are as follows:

	December 31,
	2021		2020
	(in thousands)
Deferred tax assets:
Net operating losses	$	2,367	$	2,645
Secured borrowings—government guaranteed loans	64		96
Other	153		160
Total gross deferred tax assets	2,584		2,901
Valuation allowance	(2,370)		(2,643)
	214		258
Deferred tax liabilities:
Loans receivable	(96)		(67)
	(96)		(67)
Deferred tax asset, net	$	118	$	191

The net operating loss carryforwards as of December 31, 2021 and 2020 were generated by TRSs and are available to offset future taxable income of these TRSs. 

The decrease in the valuation allowance recorded in 2021 was $273,000.

The periods subject to examination for the Company’s federal and state income tax returns are 2018 through 2021. As of December 31, 2021 and 2020, no reserves for uncertain tax positions have been established and the Company does not anticipate any material changes in the amount of unrecognized tax benefits recorded to occur within the next 12 months.

The Tax Cuts and Jobs Act of 2017, signed into law in late December 2017, made sweeping changes to provisions of the Code applicable to businesses. The CARES Act, signed into law in March 2020, made additional changes to provisions on the Code applicable to the businesses. Management has reviewed these statutory changes and determined that the impact to the Company’s consolidated financial statements is not material.