Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Holdings TRS and Observatory TRS are taxable entities and their consolidated provision for income taxes consisted of the following for the years ended December 31, 2023, 2022 and 2021 (amounts in thousands):

	For the Year Ended December 31,
	2023		2022		2021
Current:
Federal	$	(783)	$	(319)	$	(266)
State and local	(695)		(227)		(347)
Total current	(1,478)		(546)		(613)
Deferred:
Federal	(710)		(264)		1,206
State and local	(527)		(736)		1,141
Total deferred	(1,237)		(1,000)		2,347
Income tax (expense) benefit	$	(2,715)	$	(1,546)	$	1,734

As of December 31, 2023, Empire State Realty Trust, Inc. had $103.0 million of NOL carryforwards that may be used in the future to reduce the amount otherwise required to be distributed by ESRT to meet REIT requirements. However, for federal income tax purposes, the NOL will not be able to offset more than 80% of ESRT’s REIT taxable income and may not be able to reduce the amount required to be distributed by ESRT to meet REIT requirements to zero. The federal NOL may be carried forward indefinitely. Other limitations may apply to ESRT’s ability to use its NOL to offset taxable income.

As of December 31, 2023, the Observatory TRS had a federal income tax receivable of $2.5 million. This receivable reflects an anticipated refund resulting from the carryback of 2020 NOL to previous tax years. The Observatory TRS has $1.5 million of federal NOL carryforward that may be used to offset future taxable income, if any. The federal NOL may be carried forward indefinitely.

We measure deferred tax assets using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid.

The effective income tax rate is 44.5%, 33.6% and 26.0% for the years ended December 31, 2023, 2022 and 2021, respectively. The actual tax provision differed from that computed at the federal statutory corporate rate as follows (amounts in thousands):

	For the Year Ended December 31,
	2023		2022		2021
Federal tax benefit (expense) at statutory rate	$	(1,494)	$	(583)	$	940
State income tax benefit (expense), net of federal benefit	(1,221)		(963)		794
Income tax (expense) benefit	$	(2,715)	$	(1,546)	$	1,734

The income tax effects of temporary differences that give rise to deferred tax assets are presented below as of December 31, 2023, 2022 and 2021 (amounts in thousands):

	2023		2022		2021
Deferred tax assets:
Deferred revenue on unredeemed Observatory admission ticket sales	$	616	$	535	$	383
Federal net operating loss carryforward credit	328		969		1,393
New York State net operating loss carryforward credit	—		250		612
New York City net operating loss carryforward credit	—		233		704
Other deferred tax assets	161		261		—
Deferred tax assets	$	1,105	$	2,248	$	3,092

Deferred tax assets at December 31, 2023, 2022 and 2021 are included in prepaid expenses and other assets on the consolidated balance sheets. The deferred tax assets at December 31, 2023 are mainly attributable to a timing difference in recognizing income on unredeemed Observatory admission tickets and the inclusion of the Federal net operating loss to be carried forward and utilized during income years indefinitely. No valuation allowance has been recorded against the deferred tax asset because the Company believes it is more likely than not that the deferred tax asset will be realized. This determination is based on the Observatory TRS’s anticipated future taxable income and the reversal of the deferred tax asset.

As of December 31, 2023, 2022 and 2021, the TRS entities have no amount of unrecognized tax benefits. As of December 31, 2023, the tax years ended December 31, 2020 through December 31, 2023 remain open for an audit by the Internal Revenue Service, state or local authorities.