INCOME TAXES
The Company has elected to be taxed as a REIT under Section 856 of the Code and intends to continue to comply with the provisions of the Code. As a REIT, the Company generally is not subject to federal or state income tax. To maintain its qualification as a REIT, the Company must distribute at least 90% of its REIT taxable income to its stockholders each year and meet certain other tests relating to assets and income. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain state and local taxes. Under certain circumstances, even though the Company qualifies as a REIT, federal income and excise taxes may be due on its undistributed taxable income. Except as described below, no provision for income taxes has been provided in the accompanying financial statements because the Company, as a REIT, is not subject to federal or state taxation because it has paid or will pay dividends in amounts that exceed at least 90% of its current year taxable income.
Book to tax differences primarily relate to amortization of realized losses on the termination of swap contracts, share- based compensation expense, and unrealized gain (loss) on investments and interest rate swaps, swaptions and caps.
The per share tax character of the common, Series A Preferred Stock and Series B Preferred Stock distributions declared to stockholders in 2017 of $1.00, $1.9375 and $1.875, respectively, is estimated to be $0.760, $1.9375 and $1.875 ordinary income, respectively, and $0.240 return of capital to the Company's common stockholders.
The estimated federal tax cost and the tax basis components of distributable earnings were as follows (in thousands):
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December 31, 2017 | | |
Cost of investments | | $ | 13,104,169 |
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Gross gain | | $ | 37,709 |
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Gross loss | | (36,314 | ) |
Net unrealized gain (loss) | | $ | 1,395 |
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Undistributed ordinary income | | $ | — |
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Capital loss carryforwards | | $ | 559,282 |
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As of December 31, 2017, the Company's estimated capital loss carryforwards available to offset future realized gains are subject to current and future limitations in accordance with Code section 382 and expire as follows (in thousands):
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| | | | |
December 31, 2018 | | 456,259 |
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December 31, 2021 | | 9,527 |
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December 31, 2022 | | 93,496 |
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Total | | $ | 559,282 |
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As of December 31, 2017 and 2016, the Company had no undistributed taxable income. Tax years from 2014 through 2017 remain open to examination by U.S. federal, state and local, or non-U.S. tax jurisdictions. During the year ended December 31, 2016, the Company recorded a $1.7 million non-recurring charge related to a prior period tax liability, which is recorded in General, administrative and other expenses in the Consolidated Statements of Operations, and was paid during 2017. No other income tax provision was recorded for the Company's open tax years.