INCOME TAX
The Company formed two wholly-owned subsidiaries, (i) ACRC W TRS in December 2013 and (ii) ACRC U TRS in March 2014, in order to issue and hold certain loans intended for sale. The Company also formed a wholly-owned subsidiary, FL3 TRS, in March 2017 in order to hold a portion of the CLO Securitization to the extent it generates excess inclusion income.
The income tax provision for the Company and the TRSs consisted of the following for the years ended December 31, 2017, 2016 and 2015 ($ in thousands):
|
| | | | | | | | | | | |
| For the years ended December 31, |
| 2017 | | 2016 | | 2015 |
Current | $ | 25 |
| | $ | 21 |
| | $ | (11 | ) |
Deferred | — |
| | — |
| | — |
|
Excise tax | 153 |
| | 209 |
| | — |
|
Total income tax expense (benefit), including excise tax | $ | 178 |
| | $ | 230 |
| | $ | (11 | ) |
For the years ended December 31, 2017 and 2016, the Company recorded an expense of $153 thousand and $209 thousand, respectively, for U.S. federal excise tax. Excise tax represents a 4% tax on a portion of the required amount of the Company’s ordinary income and net capital gains not distributed during the year. If it is determined that the Company’s estimated current year taxable income plus any undistributed shortfall from its prior calendar year will be in excess of estimated dividend distributions (including capital gain dividend) for the current year, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations.
The TRSs recognize interest and penalties related to unrecognized tax benefits within income tax expense in the Company’s consolidated statements of operations. Accrued interest and penalties, if any, are included within other liabilities in the Company’s consolidated balance sheets.
As of December 31, 2017, tax years 2014 through 2016 remain subject to examination by taxing authorities. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.