We have maintained and intend to maintain our election as a REIT under the Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable income to our stockholders. As a REIT, we generally will not be subject to U.S. federal income tax if we distribute 100% of our taxable income to our stockholders and satisfy certain other requirements; instead, income tax is paid directly by our stockholders on the dividends distributed to them. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax. Taxable income from non-REIT activities managed through our TRS is subject to applicable U.S. federal, state and local income taxes. Our international subsidiaries are also subject to income taxes in the jurisdictions in which they operate.

From our TRS and our foreign operations, income tax expense (benefit) were as follows (in thousands):

	For the Years Ended December 31,
	2018			2017			2016
Current income tax (benefit) expense:
Domestic	$	(125	)	$	(41	)	$	42
Foreign		3,294			3,062			1,856
		3,169			3,021			1,898
Deferred income tax (benefit) expense:
Domestic		(3,713	)		(233	)		147
Foreign		1,471			(107	)		(8,875	)
		(2,242	)		(340	)		(8,728	)
Income tax expense (benefit)	$	927		$	2,681		$	(6,830	)

A reconciliation of the income tax expense (benefit) at the statutory income tax rate and the effective tax rate for income before income taxes for the years ended December 31, 2018, 2017, and 2016 is as follows (in thousands):

	2018			2017			2016
Income before income tax	$	1,019,404		$	293,919		$	219,107
Income tax at the U.S. statutory federal rate (21% in 2018 and 35% in 2017 and 2016)		214,075			102,872			76,687
Increase (decrease) resulting from:
Foreign rate differential		(2,643	)		(2,326	)		1,434
State income taxes, net of federal benefit		379			—			66
U.S. earnings not subject to federal income tax		(208,472	)		(98,026	)		(84,927	)
Equity investments		(46	)		3,293			4,297
Change in valuation allowance		(2,668	)		(5,391	)		(6,104	)
Other items, net		302			2,259			1,717
Total income tax expense (benefit)	$	927		$	2,681		$	(6,830	)

The foreign provision (benefit) for income taxes is based on foreign profit before income taxes of $18.6 million in 2018 as compared with foreign losses before income taxes of $(0.1) million in 2017, and $(23.5) million in 2016.

The domestic provision (benefit) for income taxes is based on income before income taxes of $8.0 million in 2018 from our TRS as compared with income before income taxes of $13.9 million in 2017, and a loss before income taxes of $(1.4) million in 2016.

At December 31, 2018 and 2017, components of our deferred tax assets and liabilities were as follows (in thousands):

	2018			2017
Deferred tax assets:
Operating loss and interest deduction carry forwards	$	21,984		$	24,580
Other		277			504
Total deferred tax assets		22,261			25,084
Valuation allowance		(3,444	)		(11,101	)
Total net deferred tax assets	$	18,817		$	13,983
Deferred tax liabilities:
Property and equipment	$	(12,359	)	$	(4,336	)
Net unbilled revenue		(1,633	)		(6,113	)
Partnership investments		—			(2,099	)
Other		(300	)		(1,320	)
Total deferred tax liabilities		(14,292	)		(13,868	)
Net deferred tax asset (liability)	$	4,525		$	115

At December 31, 2018, our U.S. net operating losses (“NOLs”) consisted of $78.3 million of federal NOLs and $99.9 million of state NOLs available as offsets to future years’ taxable income. The NOLs primarily expire between 2022 and 2036. We have alternative minimum tax credits of $0.1 million as of December 31, 2018. To the extent these alternative minimum tax credits exceed regular tax liability in tax years 2019 through 2021, 50% of the excess credit are refundable. Any remaining alternative minimum tax credit will be refunded in 2022. At December 31, 2018, we had foreign NOLs of $8.6 million that may be carried forward indefinitely.

The valuation allowance disclosed in the table above relates to foreign and domestic net operating loss carryforwards and other net deferred tax assets that may not be realized. As of each reporting date, we consider all new evidence that could impact the future realization of our deferred tax assets. In the evaluation of the need for a valuation allowance on our deferred income tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, carryback of future period losses to prior periods, projected future taxable income, tax planning strategies and recent financial performance.

During the fourth quarter of 2018, we released $4.4 million of valuation allowances previously recorded against our U.S. federal and state net deferred tax assets. We now expect these domestic deferred tax assets will be fully utilized to offset taxable income in future years. The decision to reverse the valuation allowance was due to improved operating income in our TRS resulting in a three-year cumulative income position at the end of 2018 and future year taxable income projected in our forecasts.

We also evaluated the need for a valuation allowance on our foreign deferred income tax assets. In doing so, we considered all available evidence to determine whether it is more likely than not that the foreign deferred income tax assets will be realized. Based on our review of all positive and negative evidence, we concluded that a partial valuation allowance should remain against certain foreign deferred income tax assets that are not expected to be realized through future sources of taxable income generated from scheduled reversals of deferred income tax liabilities and forecasted taxable income from operating activity.

We have no material uncertain tax position liabilities and related interest or penalties recorded at December 31, 2018.

We have met the annual REIT distribution requirements by payment of at least 90% of our taxable income in 2018, 2017, and 2016. Earnings and profits, which determine the taxability of such distributions, will differ from net income reported for financial reporting purposes due primarily to differences in cost basis, differences in the estimated useful lives used to compute depreciation, and differences between the allocation of our net income and loss for financial reporting purposes and for tax reporting purposes.

A schedule of per share distributions we paid and reported to our stockholders is set forth in the following:

	For the Years Ended December 31,
	2018		2017		2016
Common share distribution	$	0.990000	$	0.950000	$	0.900000
Ordinary income		0.438792		0.655535		0.619368
Capital gains(1)		0.551208		0.021022		0.102552
Unrecaptured Sec. 1250 gain		0.132280		0.004647		0.045432
Section 19A Dividends		0.438792		—		—
Return of capital		—		0.273443		0.178080

(1)	Capital gains include unrecaptured Sec. 1250 gains.

As a partnership, the allocated share of income of the Operating Partnership is included in the income tax returns of the general and limited partners. Accordingly, no accounting for income taxes is generally required for such income of the Operating Partnership. However, the Operating Partnership has formed a TRS on behalf of Medical Properties Trust, Inc., which is subject to U.S. federal, state and local income taxes at regular corporate rates, and its international subsidiaries are subject to income taxes in the jurisdictions in which they operate. See discussion above under Medical Properties Trust, Inc. for more details of income taxes associated with our TRS and international operations.