INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

16. 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,
	2022		2021
	(in thousands)
Income from continuing operations before income taxes for TRSs	$	6,128	$	9,242
Expected federal income tax provision	$	1,287	$	1,941
State income taxes	43		(40)
Change in valuation allowance	300		(273)
Other	(499)		1,364
Income tax provision	$	1,131	$	2,992

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

	December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Net operating losses	$	2,664	$	2,367
Secured borrowings—government guaranteed loans	54		64
Other	145		153
Total gross deferred tax assets	2,863		2,584
Valuation allowance	(2,670)		(2,370)
	193		214
Deferred tax liabilities:
Loans receivable	(71)		(96)
	(71)		(96)
Deferred tax asset, net	$	122	$	118

The net operating loss carryforwards as of December 31, 2022 and 2021 were generated by TRSs and are available to offset future taxable income of these TRSs. 

The increase in the valuation allowance recorded in 2022 was $300,000.

The periods subject to examination for the Company’s federal and state income tax returns are 2019 through 2022. As of December 31, 2022 and 2021, 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.