v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
14. INCOME TAXES

The Company elected to be taxed as a REIT under the Internal Revenue Code (“the Code”), commencing with the taxable year ended December 31, 2015 (the REIT Election”). As such, the Company’s income is generally not subject to U.S. federal, state and local corporate income taxes, or taxes in foreign jurisdictions other than as described below.
Certain of the Company’s subsidiaries have elected to be treated as TRSs. TRSs permit the Company to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code, and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, the Company will continue to maintain its qualification as a REIT. The Company’s TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in TRSs.

Components of the provision for income taxes consist of the following ($ in thousands):
 Year Ended December 31,
202520242023
Current expense (benefit) 
U.S. federal$973 $1,321 $2,204 
State and local494 443 858 
Total current expense (benefit)1,467 1,764 3,062 
Deferred expense (benefit)  
U.S. federal1,091 940 964 
State and local935 744 218 
Total deferred expense (benefit)2,026 1,684 1,182 
Provision for income tax expense (benefit)$3,493 $3,448 $4,244 

A reconciliation between the U.S. federal statutory income tax rate and the effective tax rate for the years ended December 31, 2025, 2024 and 2023 is as follows:
Year Ended December 31,
 2025
U.S. statutory tax rate$14,109 21.00 %
State and local income tax, net of Federal income tax effect (1)1,136 1.69 %
Foreign tax effects
Cayman Islands non-taxable income(6,677)(9.94)%
Change in valuation allowance73 0.11 %
Nontaxable or nondeductible items
REIT income not subject to corporate income tax(5,822)(8.67)%
Section 162(m) executive compensation limitation1,807 2.69 %
Other(146)(0.22)%
Other Adjustments
Capital loss utilization(987)(1.46)%
Effective income tax rate$3,493 5.20 %
(1)State and local taxes in Illinois and New York City made up the majority of the tax effect in this category.
Year Ended December 31,
 20242023
U.S. statutory tax rate21.00 %21.00 %
REIT income not subject to corporate income tax(16.50)%(15.22)%
Increase due to state and local taxes0.47 %1.07 %
Change in valuation allowance(0.09)%(1.57)%
Offshore non-taxable income(3.97)%(3.79)%
Uncertain tax position recorded (released)— %0.14 %
Section 163(j) interest expense limitation0.35 %0.17 %
REIT income taxes0.03 %0.14 %
Return to provision0.50 %(0.23)%
Section 162(m) executive compensation limitation1.51 %1.42 %
Other(0.34)%0.92 %
Effective income tax rate2.96 %4.05 %

The differences between the Company’s statutory rate and effective tax rate are largely determined by the amount of income subject to tax by the Company’s TRS subsidiaries. The Company expects that its future effective tax rate will be determined in a similar manner.

As of December 31, 2025 and 2024, the Company’s net deferred tax assets (liabilities) were $(6.7) million and $(4.6) million, respectively, and are included in other assets (liabilities) in the Company’s consolidated balance sheets. The Company believes it is more likely than not that the deferred tax assets (aside from the exception noted below) will be realized in the future. Realization of the deferred tax assets (liabilities) is dependent upon the Company’s generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain 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 has recorded deferred tax assets related to net operating losses in the taxable REIT subsidiaries that are expected to be fully utilized in future periods. The net operating loss subject to unlimited carryforward is $0.9 million as of December 31, 2025.

The components of the Company’s deferred tax assets and liabilities are as follows ($ in thousands):
December 31, 2025December 31, 2024
Deferred Tax Assets 
NOL Carryforward$576 $635 
Net unrealized losses486 486 
Capital losses carryforward— 201 
Valuation allowance— (201)
Interest expense limitation2,111 1,974 
Valuation allowance(2,121)(1,974)
Total Deferred Tax Assets$1,052 $1,121 

December 31, 2025December 31, 2024
Deferred Tax Liability 
Basis difference in operating partnerships$7,721 $5,764 
Total Deferred Tax Liability$7,721 $5,764 
 
As of December 31, 2024, the Company had $0.2 million of deferred tax assets relating to capital losses which it may only use to offset capital gains. A portion of these tax attributes expired unused on December 31, 2025.
The Company’s tax returns are subject to audit by taxing authorities. Generally, as of December 31, 2025, the tax years 2022-2025 remain open to examination by the major taxing jurisdictions in which the Company is subject to taxes. Two of the Company’s subsidiary entities are currently under audit in New York City for tax years 2014-2020 and 2024, respectively. The Company does not expect these audits to result in any material changes to the Company’s financial position or performance. In April 2023, a settlement was reached for $2.6 million with New York City pertaining to an audit of the Company for the years 2012-2013 resulting in an incremental income tax expense of $0.2 million for the twelve months ended December 31, 2023. The Company does not expect tax expense to have an impact on either short or long-term liquidity or capital needs.

Under U.S. GAAP, a tax benefit related to an income tax position may be recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities based on the technical merits of the position. As of December 31, 2025 and 2024 the Company did not have any unrecognized tax benefits. As of December 31, 2025, the Company has not recognized interest or penalties related to uncertain tax positions. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record a significant liability for unrecognized tax benefits within the next twelve months.

On July 4, 2025, H.R.1, referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law. OBBBA permanently extends and modifies certain provisions of the Tax Cuts and Jobs Act of 2017, including the Internal Revenue Code Section 199A qualified business income deduction that allows certain investors to continue deducting 20% of their qualified REIT dividends. Additionally, OBBBA modifies the REIT asset test requirement with respect to TRSs, providing that not more than 25% (previously 20%) of the gross value of a REIT’s assets may be represented by securities of TRS subsidiaries (effective in 2026). The OBBBA legislation is not expected to have a material impact on our effective tax rate, deferred tax position, or results of operations in 2025.