Income Taxes

12 Months Ended

Dec. 31, 2019

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, 2019, 2018 and 2017, is comprised of the following components:



	For the Year Ended December 31, 2019
	Federal			State			Total
Current expense	$	10,164		$	2,936		$	13,100
Tax credits/true-up	(3,633		)	(30		)	(3,663		)
Change in deferred expense/(benefit)	1,787			84			1,871
Total tax expense	$	8,318		$	2,990		$	11,308



	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	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 benefit	1,700			542			2,242
Total tax expense	$	1,804		$	1,821		$	3,625

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,
	2019					2018					2017
Expected tax at statutory rate	$	97,110		21.0	%	$	95,828		21.0	%	$	186,274		35.0	%
Non-taxable REIT income	(82,717		)	(17.9	)%	(83,022		)	(18.2	)%	(170,811		)	(32.1	)%
State and local tax expense - net of federal benefit	2,837			0.6	%	2,385			0.5	%	2,306			0.4	%
Change in valuation allowance	(207		)	—	%	(1,052		)	(0.2	)%	159			—	%
Tax credits/true-up	(3,663		)	(0.8	)%	(6,016		)	(1.3	)%	(5,956		)	(1.1	)%
Remeasurement of deferred balances	—			—	%	—			—	%	(8,460		)	(1.6	)%
Miscellaneous	(2,052		)	(0.4	)%	1,121			0.2	%	113			—	%
Total provision	$	11,308		2.5	%	$	9,244		2.0	%	$	3,625		0.6	%

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



	December 31, 2019			December 31, 2018
Deferred tax liabilities:
Fixed assets	$	(23,805	)	$	(20,907	)
Operating lease right-of-use assets	(2,475		)	—
Other	(84		)	(96		)
State deferred taxes	(3,405		)	(3,076		)
Total deferred tax liabilities	(29,769		)	(24,079		)

Deferred tax assets:
Captive insurance subsidiary	312			324
Accrued liabilities	2,006			1,772
Stock compensation	2,118			1,604
Operating lease liabilities	2,478			—
SmartStop TRS	219			219
Other	50			53
State deferred taxes	7,250			7,196
Total deferred tax assets	14,433			11,168

Valuation allowance	(3,665		)	(3,872		)

Net deferred income tax liabilities	$	(19,001	)	$	(16,783	)

The state income tax net operating losses expire between 2020 and 2037. The valuation allowance is associated with the state income tax net operating losses. The tax years 2015 through 2018 remain open related to the state returns, and 2016 through 2018 for the federal returns.