INCOME TAXES

As a REIT, the Company is generally not subject to federal income tax with respect to that portion of its income which is distributed annually to its stockholders. However, the Company has elected to treat one of its corporate subsidiaries, Extra Space Management, Inc., as a TRS. In general, the Company’s TRS may perform additional services for tenants and generally may engage in any real estate or non-real estate related business. A TRS is subject to federal corporate income tax. The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes.” Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. The Company has elected to use the Tax-Law-Ordering approach to determine when excess tax benefits will be realized.

The income tax provision for the years ended December 31, 2018, 2017 and 2016, is comprised of the following components:



	For the Year Ended December 31, 2018
	Federal			State			Total
Current expense	$	9,136		$	2,426		$	11,562
Tax credits/true-up	(5,841		)	(175		)	(6,016		)
Change in deferred expense/(benefit)	3,730			(32		)	3,698
Total tax expense	$	7,025		$	2,219		$	9,244



	For the Year Ended December 31, 2017
	Federal			State			Total
Current expense	$	5,677		$	1,662		$	7,339
Tax credits/true-up	(5,573		)	(383		)	(5,956		)
Change in deferred expense	1,700			542			2,242
Total tax expense	$	1,804		$	1,821		$	3,625



	For the Year Ended December 31, 2016
	Federal			State			Total
Current expense	$	14,627		$	2,368		$	16,995
Tax credits/true-up	(312		)	—			(312		)
Change in deferred benefit	(369		)	(467		)	(836		)
Total tax expense	$	13,946		$	1,901		$	15,847

A reconciliation of the statutory income tax provisions to the effective income tax provisions for the periods indicated is as follows:



	For the Year Ended December 31,
	2018					2017					2016
Expected tax at statutory rate	$	95,828		21.0	%	$	186,274		35.0	%	$	144,708		35.0	%
Non-taxable REIT income	(83,022		)	(18.2	)%	(170,811		)	(32.1	)%	(131,112		)	(31.7	)%
State and local tax expense - net of federal benefit	2,385			0.5	%	2,306			0.4	%	2,399			0.6	%
Change in valuation allowance	(1,052		)	(0.2	)%	159			—	%	(845		)	(0.2	)%
Tax credits/true-up	(6,016		)	(1.3	)%	(5,956		)	(1.1	)%	(312		)	(0.1	)%
Remeasurement of deferred balances	—			—	%	(8,460		)	(1.6	)%	—			—	%
Miscellaneous	1,121			0.2	%	113			—	%	1,009			0.2	%
Total provision	$	9,244		2.0	%	$	3,625		0.6	%	$	15,847		3.8	%

The major sources of temporary differences stated at their deferred tax effects are as follows:



	December 31, 2018			December 31, 2017
Deferred tax liabilities:
Fixed assets	$	(20,907	)	$	(15,271	)
Other	(96		)	(108		)
State deferred taxes	(3,076		)	(2,822		)
Total deferred tax liabilities	(24,079		)	(18,201		)

Deferred tax assets:
Captive insurance subsidiary	324			252
Accrued liabilities	1,772			873
Stock compensation	1,604			1,287
Solar credit	—			43
Other	53			57
SmartStop TRS	219			219
State deferred taxes	7,196			7,802
Total deferred tax assets	11,168			10,533

Valuation allowance	(3,872		)	(4,924		)

Net deferred income tax liabilities	$	(16,783	)	$	(12,592	)

The state income tax net operating losses expire between 2019 and 2036. The valuation allowance is associated with the state income tax net operating losses. The tax years 2014 through 2017 remain open related to the state returns, and 2015 through 2017 for the federal returns.

Federal tax reform legislation that was enacted on December 22, 2017 (commonly known as the Tax Cuts and Jobs Act) (the “2017 Tax Legislation”) made substantial changes to the Internal Revenue Code. Among those changes were a reduction in the U.S. federal corporate tax rate from the previous rate of 35% to 21%, the elimination or modification of various allowed deductions, and a deduction for REIT stockholders that are individuals, trusts and estates of up to 20% of ordinary REIT dividends. Many of the provisions of the 2017 Tax Legislation required guidance through the issuance of Treasury regulations in order to assess their effect. It is possible that there will be technical corrections legislation proposed with respect to the 2017 Tax Legislation, the effect of which cannot be predicted and may be adverse to the Company or its stockholders.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the 2017 Tax Legislation. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Legislation enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the 2017 Tax Legislation for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the 2017 Tax Legislation is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the 2017 Tax Legislation. The Company recorded a provisional estimate of the impact of the 2017 Tax Legislation for the year ended December 31, 2017. The SAB 118 measurement period closed on December 22, 2018. The Company's accounting for the 2017 Tax Legislation under SAB 118 has been finalized with no additional adjustments.

For the year ended December 31, 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The tax benefit recorded related to the remeasurement of the deferred tax balance and valuation allowance was $8,606, which is included as a component of income tax expense for the year ended December 31, 2017. The Company made no additional adjustments to this initial remeasurement for the year ended December 31, 2018.