v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For U.S. federal income tax purposes, we elected to be treated as a REIT under the Code. To qualify as a REIT, we must meet certain organizational and operational stipulations, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders. We currently intend to adhere to these requirements and maintain our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for four years that are subsequently taxable. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes as well as to federal income and excise taxes on our undistributed taxable income.
At December 31, 2025, our 68 hotel properties were leased by our wholly owned or majority owned subsidiaries that are treated as taxable REIT subsidiaries for U.S. federal income tax purposes. Ashford TRS recognized net book income (loss) of $(54.6) million, $(54.5) million and $3.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.
We have prospectively adopted the disclosure requirements as required after the adoption of ASU 2023-09. The following table reconciles the income tax (expense) benefit of the Company at applicable statutory rates to the actual income tax (expense) benefit recorded (in thousands):
Year Ended December 31, 2025
$
%
Income tax (expense) benefit at federal statutory rate of 21%
$39,544 21.00 %
State and local income tax, net of federal income tax effect (1)
(65)(0.03)%
Changes in valuation allowance
(10,727)(5.70)%
Nontaxable or nondeductible items(798)(0.43)%
Redeemable noncontrolling interests in operating partnership(553)(0.29)%
Tax impact of REIT election
(27,517)(14.61)%
Other259 0.14 %
Total income tax (expense) benefit
$143 0.08 %
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(1) State taxes in Florida, Georgia, Tennessee and Virginia make up the majority of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the following table reconciles the income tax (expense) benefit of the TRS entities at applicable statutory rates to the actual income tax (expense) benefit recorded (in thousands):
Year Ended December 31,
20242023
Income tax (expense) benefit of the TRS entities at federal statutory rate of 21%
$11,448 $(761)
State income tax (expense) benefit, net of federal income tax benefit
1,613 (311)
Permanent differences(554)(168)
Provision to return adjustment4 15 
Gross receipts and margin taxes(1,081)(958)
Interest and penalties106 184 
Valuation allowance(12,533)1,099 
Total income tax (expense) benefit$(997)$(900)
The components of income tax (expense) benefit are as follows (in thousands):
Year Ended December 31,
202520242023
Current:
Federal$— $8 $(195)
State(99)(994)(733)
Total current income tax (expense) benefit(99)(986)(928)
Deferred:
Federal242 (11)28 
Total deferred income tax (expense) benefit242 (11)28 
Total income tax (expense) benefit$143 $(997)$(900)
We have prospectively adopted the disclosure requirements as required after the adoption of ASU 2023-09. The following table presents the disaggregated cash paid for income taxes, net of refunds (in thousands):
Year Ended December 31, 2025
U.S. Federal$— 
U.S. State and Local(1,954)
Foreign— 
Total cash paid (refunded) during the period for income taxes$(1,954)
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(1) Individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for the year ended December 31, 2025 include California at $(2.0) million, Texas at $861,000 and Virginia at ($89,000).
For the years ended December 31, 2025, 2024 and 2023 income tax expense includes interest and penalties paid to/(received from) taxing authorities of $31,000, $(106,000) and $184,000, respectively. At December 31, 2025 and 2024, we determined that there were no material amounts to accrue for interest and penalties due to taxing authorities.
At December 31, 2025 and 2024, our net deferred tax asset, included in “prepaid expenses and other assets”, and net deferred tax liability, included in “accounts payable and accrued expenses”, on the consolidated balance sheets, respectively, consisted of the following (in thousands):
December 31,
20252024
Deferred tax assets:
Allowance for doubtful accounts$86 $87 
Unearned income1,414 768 
Federal and state net operating losses41,217 34,186 
Capital loss carryforward— 2,290 
Accrued expenses1,050 1,740 
Tax derivatives basis greater than book basis40 39 
Operating lease liability
2,253 2,265 
Investment in partnership2,725 — 
Other253 443 
Deferred tax assets
49,038 41,818 
Valuation allowance(45,901)(37,553)
Net deferred tax asset
3,137 4,265 
Deferred tax liabilities:
Prepaid expenses(4)(4)
Operating lease right-of-use assets
(2,252)(2,265)
Tax property basis less than book basis(1,054)(2,411)
Deferred tax liabilities
(3,310)(4,680)
Net deferred tax asset (liability)$(173)$(415)
At December 31, 2025, we had TRS NOLs for U.S. federal income tax purposes of $174.2 million, however $82.5 million of our NOLs are subject to limitation in the amount of approximately $1.2 million per year under Section 382 of the Internal Revenue Code. NOLs become subject to an annual limitation in the event of certain cumulative changes in the ownership of significant shareholders over a three-year period in excess of 50%, as defined under Section 382 of the Internal Revenue Code. The remaining $91.7 million of our TRS federal NOLs are not subject to the limitations of Section 382. In total, $1.9 million of our TRS federal NOLs are subject to expiration and will begin to expire in 2026. The remainder were generated after December 31, 2017 and are not subject to expiration under the Tax Cuts and Jobs Act. At December 31, 2025, we had state net operating loss carryforwards of $1.1 billion which begin to expire in 2027. The Company also has indefinite-lived state NOLs. At December 31, 2025, we had REIT NOLs for U.S. federal income tax purposes of $1.4 billion based on the latest filed tax returns. The majority of our REIT NOLs are subject to limitation on their use under Section 382. $424.0 million of our net
operating loss carryforwards will begin to expire in 2029 and are available to offset future taxable income, if any, through 2036. The remainder were generated after December 31, 2017 and are not subject to expiration under the Tax Cuts and Jobs Act.
At December 31, 2025 and 2024, we maintained a valuation allowance of $45.9 million and $37.6 million, respectively. At December 31, 2025 and 2024, we have reserved certain deferred tax assets of our TRS entities as we believe it is more likely than not that these deferred tax assets will not be realized. We considered all available evidence, both positive and negative. We concluded that the objectively verifiable negative evidence of a history of consolidated losses and the limitations imposed by the Code on the utilization of net operating losses of acquired subsidiaries outweigh the positive evidence. We believe this treatment is appropriate considering the nature of the intercompany transactions and leases between the REIT and its subsidiaries and that the current level of taxable income at the TRS is primarily attributable to our current transfer pricing arrangements. The transfer pricing arrangements are renewed upon expiration. Outside consultants prepared the transfer pricing studies supporting the rents from the leases. Outside consultants will continue to provide transfer pricing studies on any newly acquired properties. The intercompany rents are determined in accordance with the arms’ length transfer pricing standard, taking into account the cost of ownership to the REIT among other factors. We do not recognize deferred tax assets and a valuation allowance for the REIT since the REIT distributes its taxable income as dividends to stockholders, and in turn, the stockholders incur income taxes on those dividends.
The following table summarizes the changes in the valuation allowance (in thousands):
Year Ended December 31,
202520242023
Balance at beginning of year$37,553 $29,319 $31,205 
Additions8,348 8,234 — 
Deductions— — (1,886)
Balance at end of year$45,901 $37,553 $29,319