Income Taxes

12 Months Ended

Dec. 31, 2019

INCOME TAXES

The Company has elected to be taxed as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to annually distribute to its shareholders at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. The Company intends to continue to adhere to these requirements and to maintain its REIT status. As a REIT, the Company is entitled to a deduction for some or all of the distributions it pays to shareholders. Accordingly, the Company is generally subject to U.S. federal income taxes on any taxable income that is not currently distributed to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes and may not be able to qualify as a REIT until the fifth subsequent taxable year.

Notwithstanding the Company’s qualification as a REIT, the Company may be subject to certain state and local taxes on its income or properties. In addition, the Company’s consolidated financial statements include the operations of one wholly owned subsidiary that has jointly elected to be treated as a TRS and is subject to U.S. federal, state and local income taxes at regular corporate tax rates. The Company did not record any income tax expense related to the TRS for the years ended December 31, 2019, 2018 and 2017. As a REIT, the Company may also be subject to certain U.S. federal excise taxes if it engages in certain types of transactions.

Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which these temporary differences are expected to reverse. Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversal of existing taxable temporary differences, the magnitude and timing of future projected taxable income and tax planning strategies. The Company believes that it is not more likely than not that its net deferred tax asset will be realized in future periods and therefore, has recorded a valuation allowance for the balance, resulting in no effect on the consolidated financial statements.

The Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 were as follows:



	2019			2018
Deferred tax assets:
Basis difference in properties	$	2		$	2
Capital loss carryforward	3,939			3,939
Net operating loss carryforward	6,174			6,170
Other	467			467
Gross deferred tax assets	10,582			10,578
Less: valuation allowance	(10,582		)	(10,578		)
Total deferred tax assets	—			—
Deferred tax liabilities:
Other	—			—
Net deferred tax assets	$	—		$	—

The Company’s deferred tax assets and liabilities result from the activities of the TRS. As of December 31, 2019, the TRS had a capital loss carryforward and a federal net operating loss carryforward of $18,757 and $29,399, respectively, which if not utilized, will begin to expire in 2020 and 2031, respectively.

Differences between net income from the consolidated statements of operations and other comprehensive (loss) income and the Company’s taxable income primarily relate to the recognition of sales of investment properties, impairment charges recorded on investment properties and the timing of both revenue recognition and investment property depreciation and amortization.

The following table reconciles the Company’s net income to REIT taxable income before the dividends paid deduction for the years ended December 31, 2019, 2018 and 2017:



	2019		2018		2017
Net income attributable to the Company	$	32,397	$	77,640	$	251,491
Book/tax differences	91,144		588		(59,220		)
REIT taxable income subject to 90% dividend requirement	$	123,541	$	78,228	$	192,271

The Company’s dividends paid deduction for the years ended December 31, 2019, 2018 and 2017 is summarized below:



	2019			2018			2017
Distributions	$	141,172		$	116,725		$	192,271
Less: non-dividend distributions	(17,630		)	(38,497		)	—
Total dividends paid deduction attributable to earnings and profits	$	123,542		$	78,228		$	192,271

A summary of the tax characterization per share of the distributions to shareholders of the Company’s preferred stock and common stock for the years ended December 31, 2019, 2018 and 2017 follows:



	2019		2018		2017
Preferred stock
Ordinary dividends	$	—	$	—	$	1.62
Capital gain distributions	—		—		0.07
Total distributions per share	$	—	$	—	$	1.69

Common stock
Ordinary dividends (a)	$	0.58	$	0.36	$	0.76
Non-dividend distributions	0.08		0.17		—
Capital gain distributions	—		—		0.03
Total distributions per share	$	0.66	$	0.53	$	0.79


(a)	The 2019 and 2018 ordinary dividends are qualified REIT dividends that may be eligible for the 20% qualified business income deduction under Section 199A of the Code.

The Company records a benefit for uncertain income tax positions if the result of a tax position meets a “more likely than not” recognition threshold. No liabilities have been recorded as of December 31, 2019 or 2018 as a result of this provision. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2019. Returns for the calendar years 2016 through 2019 remain subject to examination by federal and various state tax jurisdictions.