Income taxes (Notes)

12 Months Ended

Dec. 31, 2019

We have elected to be taxed as a REIT, under the Internal Revenue Code of 1986, as amended, or the Code. We believe we have qualified and continue to qualify as a REIT. Under the Code, a REIT that distributes at least 90% of its REIT taxable income to its shareholders annually and meets certain other conditions is not subject to federal income taxes, but could be subject to certain state, local, and foreign taxes. We distribute 100% of our taxable income annually; therefore, a provision for federal income taxes is not required.

We distributed all of our REIT taxable income in 2018 and 2017 and, as a result, did not incur federal income tax in those years on such income. For the year ended December 31, 2019, we expect our distributions to exceed our REIT taxable income and, as a result, do not expect to incur federal income tax. We expect to finalize our 2019 REIT taxable income when we file our 2019 federal income tax return in 2020.

The income tax treatment of distributions and dividends declared on our common stock, our Series D Convertible Preferred Stock, and our Series E Redeemable Preferred Stock for the years ended December 31, 2019, 2018, and 2017, were as follows (unaudited):



	Common Stock									Series D Convertible Preferred Stock⁽¹⁾									Series E Redeemable Preferred Stock⁽¹⁾
	Year Ended December 31,
	2019			2018			2017			2019			2018			2017			2017
Ordinary income	62.4		%	69.9		%	62.1		%	64.4		%	72.7		%	85.3		%		85.3		%
Return of capital	3.2			3.8			27.2			—			—			—				—
Capital gains at 25%	2.2			0.1			0.7			2.2			0.1			1.0				1.0
Capital gains at 20%	32.2			26.2			10.0			33.4			27.2			13.7				13.7
Total	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%		100.0		%

Dividends declared	$	4.00		$	3.73		$	3.45		$	1.3125		$	1.75		$	1.75			$	0.4031


(1)	Refer to Note 16 - “Stockholders’ Equity” to our consolidated financial statements for information regarding the conversion of our Series D Preferred Stock and redemption of our Series E Preferred Stock.

Beginning in 2018, the Tax Cuts and Jobs Act of 2017 added Section 199A to allow for a new tax deduction based on certain qualified business income. Section 199A provides eligible individual taxpayers a deduction of up to 20 percent of their qualified REIT dividends.

Our dividends declared in a given quarter are generally paid during the subsequent quarter. The taxability information presented above for our dividends paid in 2019 is based upon management’s estimate. Our federal tax return for 2019 is due on or before October 15, 2020, assuming we file for an extension of the due date. Our federal tax returns for previous tax years have not been examined by the IRS. Consequently, the taxability of distributions and dividends is subject to change. The income tax treatment of distributions and dividends noted above for the year ended December 31, 2019, is inclusive of the changes to taxable income related to our 2019 real estate transactions described in Note 3 – “Investments in Real Estate” to our consolidated financial statements.

In addition to our REIT tax returns, we file federal, state, and local tax returns for our subsidiaries. We file with jurisdictions located in the U.S., Canada, India, China, and other international locations and may be subject to audits, assessments, or other actions by local taxing authorities. We recognize tax benefits of uncertain tax positions only if it is more likely than not that the tax position will be sustained, based solely on its technical merits, with the taxing authority having full knowledge of all relevant information. The measurement of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority that has full knowledge of all relevant information.

As of December 31, 2019, there were no material unrecognized tax benefits. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

Interest expense and penalties, if any, are recognized in the first period during which the interest or penalties begin accruing, according to the provisions of the relevant tax law at the applicable statutory rate of interest. We did not incur any significant tax-related interest expense or penalties for the years ended December 31, 2019, 2018, and 2017.

The following reconciles net income (loss) (determined in accordance to GAAP) to taxable income as filed with the IRS for the years ended December 31, 2018 and 2017 (in thousands and unaudited):



	Year Ended December 31,
	2018			2017
Net income	$	402,793		$	194,204
Net income attributable to noncontrolling interests	(23,481		)	(25,111		)
Book/tax differences:
Rental revenue recognition	(65,901		)	(121,589		)
Depreciation and amortization	161,514			137,576
Share-based compensation	30,771			23,466
Interest expense	(6,414		)	(5,256		)
Sales of property	(39,393		)	12,166
Impairments	—			9,011
Unrealized (gains)/losses on non-real estate investments	(95,757		)	—
Other	(5,043		)	3,642
Taxable income before dividend deduction	359,089			228,109
Dividend deduction necessary to eliminate taxable income⁽¹⁾	(359,089		)	(228,109		)
Estimated income subject to federal income tax	$	—		$	—

(1)

Total common stock and preferred stock dividend distributions paid were approximately $385.8 million and $321.8 million during the years ended December 31, 2018 and 2017, respectively.