Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

As a REIT, the Company is generally not subject to U.S. 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 certain of its corporate subsidiaries, including Extra Space Management, Inc., as a TRS. In general, a 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 U.S. federal corporate income tax and may be subject to state and local income taxes. 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.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (“IRA”). The provisions include the new Corporate Alternative Minimum Tax (“CAMT”), an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, and all of these provisions were effective for tax year 2023. The Company has evaluated the impact of these provisions and does not expect the enactment of these provisions to have a material impact on the Company's consolidated financial statements.

The income tax provision for the years ended December 31, 2023, 2022 and 2021, is comprised of the following components:

	For the Year Ended December 31, 2023
	Federal		State		Total
Current expense	$	26,516	$	6,035	$	32,551
Tax credits/true-up	(7,742)		—		(7,742)
Change in deferred expense/(benefit)	(4,151)		901		(3,250)
Total tax expense	$	14,623	$	6,936	$	21,559

 

	For the Year Ended December 31, 2022
	Federal		State		Total
Current expense	$	20,592	$	4,546	$	25,138
Tax credits/true-up	(6,071)		31		(6,040)
Change in deferred expense	1,909		(82)		1,827
Total tax expense	$	16,430	$	4,495	$	20,925

 

	For the Year Ended December 31, 2021
	Federal		State		Total
Current expense	$	21,017	$	3,520	$	24,537
Tax credits/true-up	(4,979)		(138)		(5,117)
Change in deferred benefit	818		86		904
Total tax expense	$	16,856	$	3,468	$	20,324

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,
	2023				2022				2021
Expected tax at statutory rate	$	183,111	21.0	%	$	197,887	21.0	%	$	188,600	21.0	%
Non-taxable REIT income	(161,316)		(18.5)	%	(172,966)		(18.4)	%	(166,137)		(18.5)	%
State and local tax expense - net of federal benefit	8,779		1.0	%	4,160		0.4	%	3,259		0.4	%
Change in valuation allowance	(1,148)		(0.1)	%	(1,093)		(0.1)	%	(1,061)		(0.1)	%
Tax credits/true-up	(7,742)		(0.9)	%	(6,040)		(0.6)	%	(5,117)		(0.6)	%
Miscellaneous	(125)		—	%	(1,023)		(0.1)	%	780		0.1	%
Total provision	$	21,559	2.5	%	$	20,925	2.2	%	$	20,324	2.3	%

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

	December 31, 2023		December 31, 2022
Deferred tax liabilities:
Fixed assets	$	(36,572)	$	(32,551)
Operating and Finance lease right-of-use assets	(6,831)		(6,610)
Other	(37)		(48)
State deferred taxes	(4,564)		(3,607)
Captive insurance subsidiary	(10,760)		—
Total deferred tax liabilities	(58,764)		(42,816)
Deferred tax assets:
Captive insurance subsidiary	509		335
Accrued liabilities	3,015		2,541
Stock compensation	3,961		3,467
Operating and Finance lease liabilities	9,013		8,418
Other	502		48
State deferred taxes	2,581		5,232
Total deferred tax assets	19,581		20,041
Valuation allowance	—		(1,148)
Net deferred income tax liabilities	$	(39,183)	$	(23,923)

The state income tax net operating losses expire between 2024 and 2043. The valuation allowance associated with the state income tax net operating losses was released in 2023. The tax years 2019 through 2022 remain open related to the state returns, and 2020 through 2022 for the federal returns.