Company: NXDT
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001356115-25-000021
Chunk: 162

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-08-14
Form: 10-Q
Item: Item 8
Chunk 162
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 and margin taxes. If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to shareholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of June 30, 2025, the Company believes it is in compliance with all applicable REIT requirements.As a REIT for U.S. federal income tax purposes, the Company may deduct earnings distributed to shareholders against the income generated by our REIT operations. The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries. A reconciliation of the deferred tax asset (liability) for the periods indicated is as follows (in thousands):As of June 30,As of December 31,20252024NHF TRSNREO TRSNHT TRSsCombinedNHF TRSNREO TRSNHT TRSsCombinedDeferred Tax Assets$14,945 $218 $372 $15,535 $14,942 $290 $6,561 $21,793 Valuation Allowance(10,632)— (223)(10,855)(10,487)— (6,535)(17,022)Deferred Tax Liability— (1,834)— (1,834)— (2,127)(26)(2,153)Deferred Tax Asset (Liability), net of Valuation Allowance$4,313 $(1,616)$149 $2,846 $4,455 $(1,837)$— $2,618 The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Our effective tax rates for the three months ended June 30, 2025 and 2024 were (0.73)% and (2.73)%, respectively. Our effective tax rate differs from the U.S. federal statutory corporate tax rate of 21.0% primarily due to our REIT operations generally not being subject to federal income taxes.The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more-likely