Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

13. Income Taxes

Digital Realty Trust, Inc. has elected to be treated and believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. is generally not subject to corporate level federal income taxes on taxable income distributed currently to its stockholders. Since inception, Digital Realty Trust, Inc. has distributed at least 100% of its taxable income annually. As such, no provision for federal income taxes has been included in the Company’s accompanying Consolidated Financial Statements years ended December 31, 2023, 2022 and 2021.

The Operating Partnership is a partnership and is not required to pay federal income tax. Instead, taxable income is allocated to its partners, who include such amounts on their federal income tax returns. As such, no provision for federal income taxes has been included in the Operating Partnership’s accompanying Consolidated Financial Statements.

We have elected taxable REIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. Income taxes for TRS entities were accrued, as necessary, for the years ended December 31, 2023, 2022 and 2021.

For our TRS entities and foreign subsidiaries that are subject to U.S. federal, state, local and foreign income taxes, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if we believe it is more likely than not that the deferred tax asset may not be realized, based on available evidence at the time the determination is made. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in the income statement. Deferred tax assets (net of valuation allowance) and liabilities for our TRS entities and foreign subsidiaries were accrued, as necessary, for the years ended December 31, 2023, 2022 and 2021.

As of December 31, 2023 and 2022, we had deferred tax liabilities net of deferred tax assets of approximately $1,144.9 million and $1,184.6 million, respectively, primarily related to our foreign properties, classified within Other assets (deferred tax assets) and separately stated Deferred tax liabilities, net in the consolidated balance sheet. The majority of our net deferred tax liability relates to differences between foreign tax basis and book basis of the assets acquired in the Teraco Acquisition in August 2022, Interxion Combination in March 2020, the European Portfolio Acquisition in July 2016 and the Sentrum portfolio acquisition in 2012. The valuation allowance against the deferred tax assets at December 31, 2023 and 2022 relate primarily to net operating loss carryforwards, nondeductible interest expense carryforwards and hybrid attributes that we do not expect to utilize attributable to certain foreign jurisdictions.

As of December 31, 2023, we are under examination for various years in Australia, France, Germany, Singapore and the United States.

The amount of gross unrecognized tax benefits at December 31, 2023, was $3.7 million, which includes $0.2 million of accrued interest and penalties.

Deferred income tax assets and liabilities as of December 31, 2023 and 2022 were as follows (in thousands):

	2023		2022
Gross deferred income tax assets:
Net operating loss carryforwards	$	188,735	$	175,935
Basis difference - real estate property		18,035		14,027
Basis difference - intangibles		7,744		7,682
Basis difference - equity investments		—		5,694
Tax credit carryforward		2,056		—
Other - temporary differences		180,316		132,578
Total gross deferred income tax assets		396,886		335,916
Valuation allowance		(176,268)		(125,491)
Total deferred income tax assets, net of valuation allowance		220,618		210,425
Gross deferred income tax liabilities:
Basis difference - real estate property		1,162,143		1,160,412
Basis difference - intangibles		190,607		219,653
Straight line rent		5,992		9,215
Other - temporary differences		6,750		5,744
Total gross deferred income tax liabilities		1,365,492		1,395,024
Net deferred income tax liabilities(1)	$	1,144,874	$	1,184,599

(1) Net of deferred tax assets of $6.2 million and $8.2 million for the year ended December 31, 2023 and 2022, respectively.