Shareholders should review the tax statements received from their brokerage firms, transfer agents or other institutions to confirm the dividend distribution information reported in those statements conforms to the information reported here. Shareholders should consult their tax advisors to determine their tax treatment of any dividend distributions received from Annaly Capital Management, Inc.
In accordance with the requirements for maintaining status as a real estate investment trust (“REIT”), we intend to distribute to shareholders aggregate distributions equaling at least 90% of our REIT taxable income for each taxable year. Further, we will endeavor to distribute at least 100% of our REIT taxable income so as not to be subject to tax.
Federal income tax rules allow REIT distributions to maintain the character of its underlying income in characterizing its distributions. Accordingly, while our income is generally characterized as ordinary income, we may at times classify part of our distribution as long-term capital gain or qualified dividend income. In the event cash distributions exceed taxable earnings, this amount is recorded as non-dividend distribution. Non-dividend distributions are generally treated as return of capital and reduce shareholders’ tax basis in their stock. If a shareholder’s tax basis has been reduced to zero, non-dividend distributions are then treated as capital gain income.
The Tax Cuts and Jobs Act added Section 199A which affords certain individuals a deduction of 20% of qualified REIT dividends subject to certain holding period requirements. A portion of our ordinary dividend distribution is considered a "qualified REIT dividend" for the purposes of Section 199A.
In accordance with the Internal Revenue Code, cash distributions made on January 31, 2024 with a record date of December 29, 2023 ("January Dividends") are treated as received by shareholders on December 31, 2023 to the extent of 2023 earnings and included on Form 1099-DIV for 2023.
Neither ordinary income nor capital gain distributions with respect to our common stock are anticipated to constitute unrelated business taxable income to a tax-exempt investor.