Income Taxes

12 Months Ended

Dec. 31, 2020

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders. It is the Company's current intention to adhere to these requirements and maintain the Company's qualification for taxation as a REIT. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders. However, as a REIT, the Company is still subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income of TRSs, including our TRS lessees, are subject to federal, state and local income taxes.

For federal income tax purposes, the cash distributions paid to the Company’s common shareholders and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains. Tax law permits certain characterization of distributions which could result in differences between cash basis and tax basis distribution amounts.

The following characterizes distributions paid per common share and preferred share on a tax basis for the years ended December 31, 2020, 2019 and 2018:


	2020				2019				2018
	Amount		%		Amount		%		Amount		%
Common Shares:
Ordinary non-qualified income	$	—	—	%	$	0.5609	30.03	%	$	1.2040	77.57	%
Qualified dividend	—		—	%	0.0069		0.37	%	0.3482		22.43	%
Capital gain	0.0100		33.33	%	1.3000		69.60	%	—		—	%
Return of capital	0.0200		66.67	%	—		—	%	—		—	%
Total	$	0.0300	100.00	%	$	1.8678	100.00	%	$	1.5522	100.00	%















Series C Preferred Shares:
Ordinary non-qualified income	$	—	—	%	$	0.6100	30.03	%	$	1.2605	77.57	%
Qualified dividend	—		—	%	0.0075		0.37	%	0.3645		22.43	%
Capital gain	0.4063		33.34	%	1.4138		69.60	%	—		—	%
Return of capital	0.8125		66.66	%	—		—	%	—		—	%
Total	$	1.2188	100.00	%	$	2.0313	100.00	%	$	1.6250	100.00	%

Series D Preferred Shares:
Ordinary non-qualified income	$	—	—	%	$	0.5982	30.03	%	$	1.2363	77.57	%
Qualified dividend	—		—	%	0.0074		0.37	%	0.3575		22.43	%
Capital gain	0.3984		33.33	%	1.3866		69.60	%	—		—	%
Return of capital	0.7969		66.67	%	—		—	%	—		—	%
Total	$	1.1953	100.00	%	$	1.9922	100.00	%	$	1.5938	100.00	%

Series E Preferred Shares: (1)
Ordinary non-qualified income	$	—	—	%	$	0.5982	30.03	%	$	—	—	%
Qualified dividend	—		—	%	0.0074		0.37	%	—		—	%
Capital gain	0.3984		33.33	%	1.3866		69.60	%	—		—	%
Return of capital	0.7969		66.67	%	—		—	%	—		—	%
Total	$	1.1953	100.00	%	$	1.9922	100.00	%	$	—	—	%

Series F Preferred Shares: (1)
Ordinary non-qualified income	$	—	—	%	$	0.5912	30.03	%	$	—	—	%
Qualified dividend	—		—	%	0.0073		0.37	%	—		—	%
Capital gain	0.3938		33.34	%	1.3703		69.60	%	—		—	%
Return of capital	0.7875		66.66	%	—		—	%	—		—	%
Total	$	1.1813	100.00	%	$	1.9688	100.00	%	$	—	—	%

(1) Issued upon completion of the Company's merger with LaSalle on November 30, 2018.

Of the common distribution declared on December 15, 2017 and paid on January 12, 2018, $0.3800 was treated as a 2018 distribution for tax purposes. The preferred share distributions declared on December 15, 2017 and paid on January 12, 2018 were treated as 2018 distributions for tax purposes.

Of the common distributions declared on November 19, 2018 and December 14, 2018 and paid on January 15, 2019, $0.3478 was treated as a 2019 distribution for tax purposes. The preferred share distributions declared on December 14, 2018 and paid on January 15, 2019, $0.4063 per Series C Preferred Share, $0.3984 per Series D Preferred Share, $0.3984 per Series E Preferred Share and $0.3938 per Series F Preferred Share, were treated as 2019 distributions for tax purposes.

Of the common distribution declared on December 16, 2019 and paid on January 15, 2020, $0.3800 was treated as a 2019 distribution for tax purposes. The preferred share distributions declared on December 16, 2019 and paid on January 15, 2020 were treated as 2019 distributions for tax purposes.

Of the common distribution declared on December 15, 2020 and paid on January 15, 2021, $0.0100 will be treated as a 2021 distribution for tax purposes. The preferred share distributions declared on December 15, 2020 and paid on January 15, 2021 were treated as 2021 distributions for tax purposes.

The Company's provision (benefit) for income taxes consists of the following (in thousands):


	For the year ended December 31,
	2020		2019		2018
Federal
Current	$	(127)	$	3,061	$	1,696
Deferred	(6,266)		(106)		(248)
State and local
Current	668		3,938		360
Deferred	2,028		(1,721)		(66)
Income tax expense (benefit)	$	(3,697)	$	5,172	$	1,742

A reconciliation of the statutory federal tax expense (benefit) to the Company's income tax expense (benefit) is as follows (in thousands):


	For the year ended December 31,
	2020		2019		2018
Statutory federal tax expense (benefit)	$	(72,098)	$	25,388	$	3,177
State income tax expense (benefit), net of federal tax expense (benefit)	(5,046)		943		300
REIT income not subject to tax	53,311		(21,522)		(1,828)
Change in valuation allowance	20,056		—		—
Other	80		363		93
Income tax expense (benefit), net	$	(3,697)	$	5,172	$	1,742

The Company has provided a valuation allowance against its federal and state deferred tax asset at December 31, 2020 and a valuation allowance against certain state deferred tax assets as of December 31, 2019. The Company has recorded a receivable of $6.9 million representing the portion of the current year loss that will be carried back to prior years in which the Company had taxable income. A valuation allowance has been recognized on the current year loss in excess of the amount that will be carried back and is due to the uncertainty of realizing the loss in future years.

The significant components of the Company's deferred tax assets as of December 31, 2020 and 2019 consisted of the following (in thousands):


	December 31, 2020		December 31, 2019
Deferred Tax Assets:
Net operating loss carryover	$	18,309	$	723
State taxes and other	1,631		1,158
Depreciation	980		1,668
Total deferred tax asset before valuation allowance	$	20,920	$	3,549
Valuation allowance	(20,920)		(864)
Deferred tax asset net of valuation allowance	$	—	$	2,685

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. As of December 31, 2020 and 2019, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016 and 2015, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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