7. INCOME TAXES
The Company has concluded there were no uncertain tax positions as of December 31, 2017, 2016 and 2015. The U.S. is the major tax jurisdiction for the Company and the earliest tax year subject to examination by the taxing authority is 2014.
Distributions
Distributions to stockholders are characterized for federal income tax purposes as: (i) ordinary income; (ii) non-taxable return of capital; or (iii) long-term capital gain. Distributions that exceed the Company’s current and accumulated tax earnings and profits constitute a return of capital and reduce the stockholders’ basis in the common shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the stockholders’ basis in the common shares, the distributions will generally be treated as a gain from the sale or exchange of such stockholders’ common shares. Under the new tax laws effective January 1, 2018, all distributions (other than distributions designated as capital gain distributions and distributions traceable to distributions from a taxable REIT subsidiary) which are received by a pass-through entity or an individual, are eligible for a 20% deduction from gross income. This eligibility for a 20% deduction will expire as of 2025. At the beginning of each year, the Company notifies its stockholders of the taxability of the distributions paid during the preceding year. The unaudited preliminary taxability of the Company’s 2017 distributions was:
|
| | | |
| | For the Year Ended |
| | December 31, 2017 |
Ordinary income | | — | % |
Non-taxable return of capital | | 100.0 |
|
Long-term capital gain | | — |
|
Total distribution | | 100.0 | % |
As distributions were not paid until January 2017, there was no taxability of the Company’s distributions for the years ended 2016 or 2015.