v3.26.1
Income Taxes
 3 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Certain of our domestic subsidiaries have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs permit us 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, we will continue to maintain our qualification as a REIT.
Our TRSs engage in various real estate-related operations, including special servicing of commercial real estate, originating and securitizing mortgage loans, and investing in entities which engage in real estate-related operations. As of both March 31, 2026 and December 31, 2025, approximately $3.0 billion and $2.7 billion, respectively, of assets were owned by TRS entities. Our 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 us with respect to our interest in TRSs.
The following table is a reconciliation of our U.S. federal income tax provision determined using our statutory federal tax rate to our reported income tax (benefit) provision for the three months ended March 31, 2026 and 2025 (dollars in thousands):
For the Three Months Ended March 31,
20262025
Federal statutory tax rate$11,230 21.0 %$25,172 21.0 %
REIT and other non-taxable income(8,509)(15.9)%(22,203)(18.5)%
State and local income taxes, net of federal effect742 1.4 %771 0.6 %
Intra-entity transfers(7,522)(14.1)%— — %
Other114 0.2 %26 — %
Effective tax rate$(3,945)(7.4)%$3,766 3.1 %
For the three months ended March 31, 2026 and 2025, we have utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, “Income Taxes—Interim Reporting,” to calculate our interim income tax (benefit) provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that due to market dislocation and volatility, particularly with respect to the Company’s residential assets that are housed in TRSs, the use of the discrete method is more appropriate at this time than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pretax earnings.