v3.25.2
INCOME TAX
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAX
A TRS is an entity taxed as a corporation that has not elected to be taxed as a REIT, in which a REIT directly or indirectly holds equity, and that has made a joint election with such REIT to be treated as a TRS. A TRS generally may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by the Company without jeopardizing its qualification as a REIT. A TRS is subject to applicable United States federal, state and local income tax on its taxable income. In addition, as a REIT, the Company also may be subject to a 100% excise tax on certain transactions between it and its TRS that are not conducted on an arm’s-length basis. The income tax provision is included in the line item income tax expense, including excise tax.
The income tax (benefit) provision for the Company was approximately $(0.1) million and $(25.6) thousand for the three and six months ended June 30, 2025, respectively, and $0.3 million and $0.4 million for the three and six months ended
June 30, 2024, respectively. The income tax expense for the three and six months ended June 30, 2025 and 2024 primarily related to activities of the Company’s taxable REIT subsidiary.
The income tax provision for the Company and TRS1 consisted of the following for the three and six months ended June 30, 2025 and 2024:
Three months ended
June 30,		Six months ended
June 30,
2025202420252024
Current:
Federal$(27,302)$183,000 $72,698 $288,300 
State(42,950)102,975 22,031 156,035 
Total current income tax (benefit) expense(70,252)285,975 94,729 444,335 
Total deferred income tax expense (benefit)43,873 — (8,702)— 
Excise tax(111,665)— (111,665)— 
Total income tax (benefit) expense, including excise tax$(138,044)$285,975 $(25,638)$444,335 
For the three and six months ended June 30, 2025 and 2024, the Company did not incur United States federal excise tax expense, respectively. During the six months ended June 30, 2025, the Company received a partial refund of previously paid excise tax relating to the 2023 tax year, which was received in the second quarter of 2025. 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 period. If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations.
The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months. As of June 30, 2025, tax years since 2021 remain subject to examination by taxing authorities.
The federal statutory rate was 21% for the three and six months ended June 30, 2025 and 2024. The primary difference between the Company’s statutory rate and effective tax rate is largely determined by the amount of income subject to tax by the Company’s taxable REIT subsidiary. The Company expects that its future effective tax rate will be determined in a similar manner.
As of June 30, 2025 and December 31, 2024, the Company’s deferred tax assets were $0.7 million and $0.7 million, respectively, and are included in prepaid expenses and other assets in the Company’s consolidated balance sheets. The Company believes it is more likely than not that the deferred tax assets will be realized in the future. Realization of the deferred tax assets is dependent upon the Company’s generation of sufficient taxable income in future years in appropriate tax jurisdictions to benefit from the reversal of temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.
The Company recorded deferred tax assets related to temporary differences on the fair value adjustments of the unrealized losses of loans held in the TRS and CECL allowance on loans held in the TRS. There were no valuation allowances for deferred tax assets during the three and six months ended June 30, 2025 and 2024.