INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

17. 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,
	2023		2022
	(in thousands)
Income from continuing operations before income taxes for TRSs	$	4,711	$	6,128
Expected federal income tax provision	$	989	$	1,287
State income taxes	44		43
Change in valuation allowance	(2,619)		300
Other	2,814		(499)
Income tax provision	$	1,228	$	1,131

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

	December 31,
	2023		2022
	(in thousands)
Deferred tax assets:
Net operating losses	$	44	$	2,664
Secured borrowings—government guaranteed loans	21		54
Other	232		145
Total gross deferred tax assets	297		2,863
Valuation allowance	(52)		(2,670)
	245		193
Deferred tax liabilities:
Loans receivable	—		(71)
	—		(71)
Deferred tax asset, net	$	245	$	122

The net operating loss carryforwards as of December 31, 2023 and 2022 were generated by TRSs and are available to offset future taxable income of these TRSs. 

The increase in the valuation allowance recorded in 2023 was $2,619,000.

The periods subject to examination for the Company’s federal and state income tax returns are 2020 through 2023. As of December 31, 2023 and 2022, 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.