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Income taxes | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The Company conducts its operations to qualify and be taxed as a REIT. As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution, and stock ownership tests. The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT, and therefore, the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise, or business taxes. Excise Tax Excise tax represents a non-deductible 4% tax on the required amount of the Company’s ordinary income and net capital gains not distributed during the year. The expense is calculated in accordance with applicable tax regulations. The below table details excise tax expense for the years ended December 31, 2025 and 2024, which is recorded in the “Non-investment related expenses” line item on the consolidated statement of operations (in thousands).
|  | Years Ended
|  | December 31, 2025 |  | December 31, 2024
Excise tax expense (1) |  | $ | (110) |  |  | $ | 103 |
(1)During the year ended December 31, 2025, the Company did not incur any excise tax and recorded a reduction in excise tax of $0.1 million related to an excise tax refund. REIT Net Operating Loss and Net Capital Loss Carryforwards In connection with the WMC acquisition, the Company obtained federal net operating loss ("NOL") carryforwards of $321.6 million, of which $223.8 million do not have an expiration date and can be carried forward indefinitely. However, the Company’s use of the NOLs obtained in the WMC acquisition is limited under Section 382 of the Internal Revenue Code. As of December 31, 2025 and 2024, the remaining NOL carryforwards obtained in the WMC acquisition were $317.3 million and $319.4 million, respectively. As of December 31, 2025 and 2024, the Company had estimated net capital loss ("NCL") carryforwards of $63.9 million and $278.9 million, respectively. These NCL carryforwards (which exclude the NCLs acquired from WMC) can be utilized to offset future net gains from the sale of capital assets. NCL carryforwards of $225.7 million were generated during the year ended December 31, 2020 and any unutilized NCL carryforwards expired on December 31, 2025. In connection with the WMC acquisition, the Company obtained NCL carryforwards. As of December 31, 2025 and 2024, these estimated NCL carryforwards were $153.9 million and $150.6 million, respectively. These NCL carryforwards will expire between 2026 and 2030. However, the Company’s use of these NCLs is limited under Sections 382 and 383 of the Internal Revenue Code. Reconciliation of Statutory Tax Rate to Effective Tax Rate The following is a reconciliation of the statutory federal rate to the effective rates for the year ended December 31, 2025 ($ in thousands).
|  | Year Ended December 31, 2025 |  |
|  | Amount |  | Percent |  |  |  |
Statutory federal income tax |  | $ | 10,406 |  |  | 21.0 | % |  |  |  |
State taxes, net of federal benefit |  | 260 |  |  | 0.5 | % |  |  |  |
Nontaxable or nondeductible items: |  |  |  |  |  |  |  |
REIT (income)/loss not subject to corporate income tax |  | (8,952) |  |  | (18.0) | % |  |  |  |
Differences in taxable income/(loss) from GAAP net income/(loss) |  | 2,295 |  |  | 4.6 | % |  |  |  |
Changes in valuation allowance |  | (3,121) |  |  | (6.3) | % |  |  |  |
Income tax expense / effective tax rate |  | $ | 888 |  |  | 1.8 | % |  |  |  |
Taxable REIT Subsidiaries The Company elected to treat certain domestic subsidiaries as taxable REIT subsidiaries ("TRSs"). The Company’s financial results are generally not expected to reflect provisions for current or deferred income taxes, except for any activities conducted through one or more TRSs that are subject to corporate income taxation. Currently, the Company has wholly owned domestic TRSs that are taxable as corporations and subject to U.S. federal, state, and local income tax on net income at the applicable corporate rates. The federal statutory rate for the years ended December 31, 2025 and 2024 was 21%. The Company’s effective tax rate differs from its combined U.S. federal, state, and local corporate statutory tax rate primarily due to income earned at the REIT, which is not subject to tax due to the deduction for qualifying distributions made by the Company, and any change in the valuation allowance as disclosed in further detail below. The tax expense attributable to its TRSs is recorded in the "Income tax expense" line item on the consolidated statement of operations. The below table details the tax expense attributable to its TRSs for the years ended December 31, 2025 and 2024 (in thousands).
| Years Ended
| December 31, 2025 |  | December 31, 2024
Federal | $ | 559 |  |  | $ | — |
State and Local | 329 |  |  | 112 |
Income Tax Expense | $ | 888 |  |  | $ | 112 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax reporting purposes at the TRS level. The following table discloses the components of the Company’s deferred tax assets and deferred tax liabilities, if applicable, as of December 31, 2025 and 2024 (in thousands).
| Years Ended |  |
| December 31, 2025 |  | December 31, 2024 |  |
Deferred tax assets |  |  |  |  |
Net operating loss carryforwards | $ | 24,223 |  |  | $ | 27,411 |  |  |
Capital loss carryforwards (1) | 3,925 |  |  | 7,426 |  |  |
GAAP/tax basis differences | 389 |  |  | (100) |  |  |
Total deferred tax assets | $ | 28,537 |  |  | $ | 34,737 |  |  |
Less: valuation allowance | (28,537) |  |  | (34,737) |  |  |
Net deferred tax assets | $ | — |  |  | $ | — |  |  |
(1)The capital loss carryforwards outstanding as of December 31, 2025 expire between 2026 and 2030. As of December 31, 2025 and 2024, the Company’s TRSs had an estimated gross NOL carryforward of $115.3 million and $130.5 million, respectively. The NOL carryforwards as of December 31, 2025 can be carried forward indefinitely. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which temporary differences become deductible. The Company concluded it is more likely than not the deferred tax asset will not be realized and established a valuation allowance of $28.5 million and $34.7 million as of December 31, 2025 and 2024, respectively. Uncertain Income Tax Positions Based on its analysis of any potential uncertain income tax positions, the Company concluded it did not have any uncertain tax positions that meet the recognition or measurement criteria of ASC 740 as of December 31, 2025 and 2024. The Company’s and WMC's federal income tax returns for the last three tax years are open to examination by the Internal Revenue Service. There are no ongoing U.S. federal, state or local tax examinations related to the Company. In the event that the Company incurs income tax related interest and penalties, its policy is to classify them as a component of provision for income taxes. The Company did not incur any interest or penalties during the years ended December 31, 2025 and 2024.

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