INCOME TAXES

12 Months Ended

Dec. 31, 2019

We have elected to be taxed as a REIT. As a REIT, we are generally not subject to corporate level income taxes on taxable income we distribute to our shareholders. We believe we have met the annual REIT distribution requirement by distribution of at least 90% of our taxable income to our shareholders.

Income related to our TRSs is subject to federal, state and local taxes at applicable tax rates. Our consolidated tax provision includes the income tax provision related to the operations of the TRSs as well as state and local income taxes related to the Operating Partnership.

The components of income tax expense (benefit) for the years ended December 31, 2019, 2018, and 2017 are as follows (in thousands):



	2019			2018			2017
Current:
Federal	$	869		$	(67	)	$	10
State and local	643			(425		)	777
Deferred:
Federal	(32		)	(279		)	232
State and local	20			(151		)	49
Effect of federal tax law change	—			—			606
Income tax expense (benefit)	$	1,500		$	(922	)	$	1,674

Below is a reconciliation between the provision for income taxes and the amounts computed by applying the federal statutory income tax rate to the income or loss before taxes:



	2019			2018			2017
Statutory federal income tax provision	$	17,608		$	18,943		$	35,418
Nontaxable income of the REITs	(16,996		)	(19,073		)	(35,073		)
Effect of graduated corporate tax rates	—			—			(10		)
State income taxes, net of federal tax benefit	568			266			716
Provision to return and deferred adjustment	(6		)	75			—
Effect of permanent differences and other	326			(184		)	17
Tax benefit from deduction for partnership distributions	—			(949		)	—
Effect of federal tax law change	—			—			606
Income tax provision (benefit)	$	1,500		$	(922	)	$	1,674

Deferred tax assets and liabilities are included within Other Assets in the accompanying Consolidated Balance Sheets.

Significant components of deferred tax assets (liabilities) are as follows (in thousands):



	2019			2018
Tax carryforwards	$	38		$	154
Accrued expenses	2,068			1,893
Other	32			(1		)
Net deferred tax assets	$	2,138		$	2,046

Gross deferred tax assets	$	2,172		$	2,086
Gross deferred tax liabilities	(34		)	(40		)
Net deferred tax assets	$	2,138		$	2,046

At December 31, 2019, we had state net operating losses of $0.7 million which expire beginning in 2027.

We had no unrecognized tax benefits at December 31, 2019 or in the three year period then ended. We expect no significant increase or decrease in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2019. We have no material interest or penalties relating to unrecognized tax benefits in the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 or 2017 or in the Consolidated Balance Sheets as of December 31, 2019 or 2018.

We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. In general, we are not subject to tax examinations by tax authorities for years before 2016.

Characterization of Distributions

For income tax purposes, distributions paid consist of ordinary income and capital gains or a combination thereof. For the years ended December 31, 2019, 2018, and 2017 distributions paid per share were characterized as follows (unaudited):



	2019				2018				2017
	Amount		%		Amount		%		Amount		%
Common Stock
Ordinary income	$	0.6132	85.16	%	$	0.7200	100.00	%	$	0.6725	100.00	%
Capital gain distributions	0.1068		14.84	%	—		—	%	—		—	%
Total	$	0.7200	100.00	%	$	0.7200	100.00	%	$	0.6725	100.00	%

Preferred Stock - Series B
Ordinary income	$	—	—	%	$	—	—	%	$	2.0234	100.00	%
Capital gain distributions	—		—	%	—		—	%	—		—	%
Total	$	—	—	%	$	—	—	%	$	2.0234	100.00	%

Preferred Stock - Series C
Ordinary income	$	—	—	%	$	0.5393	100.00	%	$	1.7813	100.00	%
Capital gain distributions	—		—	%	—		—	%	—		—	%
Total	$	—	—	%	$	0.5393	100.00	%	$	1.7813	100.00	%

Preferred Stock - Series D
Ordinary income	$	1.3732	85.16	%	$	1.6125	100.00	%	$	1.6125	100.00	%
Capital gain distributions	0.2393		14.84	%	—		—	%	—		—	%
Total	$	1.6125	100.00	%	$	1.6125	100.00	%	$	1.6125	100.00	%

Preferred Stock - Series E
Ordinary Income	$	1.3307	85.16	%	$	1.5625	100.00	%	$	0.0694	100.00	%
Capital gain distributions	0.2318		14.84	%	—		—	%	—		—	%
Total	$	1.5625	100.00	%	$	1.5625	100.00	%	$	0.0694	100.00	%

The dividends that were taxable to our stockholders in 2019 were 85.16% ordinary income and 14.84% capital gain distributions. The 2019 capital gain distribution was 100% related to unrecaptured Section 1250 gain. The 2019 ordinary income dividends are eligible for the 20% deduction provided by Section 199A for qualified REIT dividends.

The dividends that were taxable to our stockholders in 2018 were 100% ordinary income and were eligible for the 20% deduction provided by Section 199A for qualified REIT dividends.

The dividends that were taxable to our stockholders in 2017 were 100% ordinary income.