Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the years ended December 31, 2019 and December 31, 2018, the Company qualified to be taxed as a REIT under Code Sections 856 through 860. As a REIT, the Company is not subject to U.S. federal income tax to the extent that it makes qualifying distributions of taxable income to its stockholders. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income (subject to certain adjustments) to its shareholders and meet certain other requirements such as assets it may hold, income it may generate and its shareholder composition. It is generally the Company’s policy to distribute to its shareholders all of the Company’s taxable income.

The state and local tax jurisdictions in which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT and therefore the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees and its TRSs are subject to U.S. federal, state and local taxes. There were no significant income tax expenses for the years ended December 31, 2019, 2018 and 2017. The Company recorded a deferred tax asset of $5 million and $7 million for the years ended December 31, 2019 and 2018, respectively, relating to the activities of its TRSs. Of these amounts, the amount related to cumulative net operating losses was $22 thousand and $550 thousand as of December 31, 2019 and 2018, respectively, and the amount related to losses which were disallowed under Code Section 267(a) was $4 million and $7 million as of December 31, 2019 and 2018, respectively. The amount related to interest disallowed under Code Section 163(j) was $1 million as of December 31, 2019. There were no amounts disallowed under Code Section 163(j) as of December 31, 2018. The Company evaluates, based on both positive and negative evidence, the likelihood of realizing its deferred tax assets and established a valuation allowance of $5 million and $7 million for the years ended December 31, 2019 and 2018.

In general, cash dividends declared by the Company will be considered ordinary income to stockholders for income tax purposes. From time to time, a portion of the Company’s dividends may be characterized as capital gains or return of capital distributions.

The Company’s effective tax rate differs from its combined U.S. federal, state and city corporate statutory tax rate primarily due to the deduction of dividend distributions required to be paid under Code Section 857(a).

The Company’s 2018, 2017 and 2016 U.S. federal, state and local tax returns remain open for examination.