Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Provision

The components of our provision for income taxes for the periods presented are as follows (in thousands):


	Years Ended December 31,
	2025		2024		2023
Federal
Current	$	588	$	(450)	$	(291)
Deferred	(11)		(71)		—
	577		(521)		(291)
State and Local
Current	3,044		2,209		3,456

	3,044		2,209		3,456

Foreign
Current	39,161		34,195		41,085
Deferred	(10,874)		(4,174)		(198)
	28,287		30,021		40,887
Total Provision for Income Taxes	$	31,908	$	31,709	$	44,052

The composition of income before income taxes for the year ended December 31, 2025 is as follows (in thousands):


Income before Income Taxes	Year Ended December 31, 2025
Domestic	$	285,029
International	219,794
Total	$	504,823

A reconciliation of effective income tax for the periods presented is as follows (in thousands):


	Year Ended December 31,
	2025


Income before income taxes	$	504,823

Federal provision at statutory tax rate	$	106,013	21.0	%
REIT income not subject to federal income taxes	(88,760)		(17.6)	%
State and local taxes, net of federal benefit (a)	3,038		0.6	%
Foreign Tax Effects:
The Netherlands:
Change in valuation allowance	(6,524)		(1.3)	%
Other	278		0.1	%
United Kingdom	6,822		1.4	%
Other foreign jurisdictions	11,561		2.3	%
Changes in unrecognized tax benefits	(1,421)		(0.3)	%
Change in valuation allowance	196		0.0	%
Other	705		0.1	%
Total Provision for Income Taxes	$	31,908	6.3	%


	Years Ended December 31,
	2024		2023


Income before income taxes attributable to taxable subsidiaries	$	63,669	$	73,669

Federal provision at statutory tax rate (21%)	$	13,370	$	15,471
Non-deductible expense	6,227		3,201
Change in valuation allowance	3,215		9,970
Rate differential	2,712		1,357
State and local taxes, net of federal benefit	2,382		3,517
Other	3,803		10,536
Total Provision for Income Taxes	$	31,709	$	44,052

__________

(a)State taxes in California, North Carolina, Tennessee, and Texas made up the majority (greater than 50 percent) of the tax effect in this category.

Deferred Income Taxes

Deferred income taxes at December 31, 2025 and 2024 consist of the following (in thousands):


	December 31,
	2025		2024
Deferred Tax Assets
Net operating loss and other tax credit carryforwards	$	42,685	$	47,134
Basis differences — foreign investments	34,486		24,991


Other	741		953
Total deferred tax assets	77,912		73,078
Valuation allowance	(44,761)		(55,488)
Net deferred tax assets	33,151		17,590
Deferred Tax Liabilities
Basis differences — foreign investments	(151,820)		(147,462)


Total deferred tax liabilities	(151,820)		(147,462)
Net Deferred Tax Liability	$	(118,669)	$	(129,872)

Our deferred tax assets and liabilities are primarily the result of temporary differences related to the following:

•Basis differences between tax and GAAP for certain international real estate investments. For income tax purposes, in certain acquisitions, we assume the seller’s basis, or the carry-over basis, in the acquired assets. The carry-over basis is typically lower than the purchase price, or the GAAP basis, resulting in a deferred tax liability with an offsetting increase to goodwill or the acquired tangible or intangible assets;

•Timing differences generated by differences in the GAAP basis and the tax basis of assets such as those related to capitalized acquisition costs, straight-line rent, prepaid rents, and intangible assets, as well as unearned and deferred compensation; and

•Tax net operating losses in certain subsidiaries, including those domiciled in foreign jurisdictions, that may be realized in future periods if the respective subsidiary generates sufficient taxable income. Certain net operating losses and interest carryforwards were subject to limitations as a result of certain business combinations, and thus could not be applied to reduce future income tax liabilities.

As of December 31, 2025, U.S. federal and state net operating loss carryforwards were $20.4 million and $12.7 million, respectively, which will begin to expire in 2033. As of December 31, 2025, net operating loss carryforwards in foreign jurisdictions were $105.9 million, which will begin to expire in 2026.

The net deferred tax liability in the table above is comprised of deferred tax asset balances, net of certain deferred tax liabilities and valuation allowances, of $33.2 million and $17.6 million at December 31, 2025 and 2024, respectively, which are included in Other assets, net in the consolidated balance sheets, and other deferred tax liability balances of $151.8 million and $147.5 million at December 31, 2025 and 2024, respectively, which are included in Deferred income taxes in the consolidated balance sheets.

Our taxable subsidiaries recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits (in thousands):


	Years Ended December 31,
	2025		2024
Beginning balance	$	2,909	$	5,112
Decrease based on tax positions related to the prior year	(1,588)		(1,379)
Addition based on tax positions related to the current year	1,543		77
Decrease due to lapse in statute of limitations	(742)		(745)
Foreign currency translation adjustments	110		(156)
Ending balance	$	2,232	$	2,909

At December 31, 2025 and 2024, we had unrecognized tax benefits as presented in the table above. These unrecognized tax benefits are recorded as liabilities within Accounts payable, accrued expenses and other liabilities on our consolidated balance sheets. We recognize interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2025 and 2024, we had approximately $0.3 million and $1.0 million, respectively, of accrued interest related to uncertain tax positions.

Income Taxes Paid

Income taxes paid during the year ended December 31, 2025 consist of the following (in thousands):


	Year Ended December 31, 2025
Domestic:
Federal	$	(257)
State and local	2,453
Foreign:
The Netherlands	7,664
United Kingdom	6,642
Poland	4,561
Canada	3,559
France	2,954
Spain	2,193
Mexico	2,056
Other Foreign	8,270
Total Income Taxes Paid	$	40,095

Income taxes paid were $36.3 million and $38.6 million during the years ended December 31, 2024, and 2023, respectively.

REIT Qualification

We elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code effective as of February 15, 2012. In order to maintain our qualification as a REIT, we are required, among other things, to distribute at least 90% of our REIT net taxable income to our stockholders and meet certain tests regarding the nature of our income and assets. As a REIT, we are not subject to federal income taxes on our income and gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as well as other factors. We believe that we have operated, and we intend to continue to operate, in a manner that allows us to continue to qualify as a REIT. We conduct business primarily in North America and Europe, and as a result, we or one or more of our subsidiaries file income tax returns in the United States federal jurisdiction and various state, local, and foreign jurisdictions.

Tax authorities in the relevant jurisdictions may select our tax returns for audit and propose adjustments before the expiration of the statute of limitations. Our tax returns filed for tax years 2020 through 2024 or any ongoing audits remain open to adjustment in the major tax jurisdictions.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

W. P. Carey Inc. 10-K