Income Taxes

For the years ended December 31, 2018 and 2017, we have elected to be taxed as a REIT, and our former parent also elected to be taxed as a REIT for the year ended December 31, 2016. Accordingly, we incurred no federal income tax expense for any of the three years in the period ended December 31, 2018 related to our REIT subsidiaries. The only federal income taxes included in the accompanying financial statements relate to activities of our TRSs. Due to the passage of federal tax reform legislation, which was signed into law on December 22, 2017 and which we refer as the 2017 Tax Act, our TRSs were required to decrease the net deferred tax liability, which resulted in a net tax benefit of $3.9 million during the year ended December 31, 2017. The recorded tax charges in 2017 for the impact of the 2017 Tax Act were made using the current available information and technical guidance on the interpretations of the 2017 Tax Act. As permitted by Securities and Exchange Commission Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, we recorded estimates and have subsequently finalized our accounting analysis based on the guidance, interpretations and data available as of December 31, 2018. We did not have any changes to our 2017 estimate related to the 2017 Tax Act and therefore, it had no impact to our 2018 financial statements.

Our financial statements include the operations of our TRSs, which are subject to federal, state and local income taxes on their taxable income. As a REIT, we may also be subject to federal excise taxes if we engage in certain types of transactions. Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock ownership requirements and various other qualification tests. As of December 31, 2018, our TRSs have an estimated federal and state net operating loss of $6.8 million, which will expire in 2037 and 2038. The net basis of our assets and liabilities for tax reporting purposes is approximately $114.0 million lower than the amounts reported in our balance sheet as of December 31, 2018.

The following is a summary of our income tax benefit (expense):



	Year Ended December 31,
	2018		2017			2016
	(in thousands)
Current tax benefit (expense)	$	20	$	(496	)	$	(1,083	)
Deferred tax benefit (expense)	718		10,408			—
Income tax benefit (expense)	$	738	$	9,912		$	(1,083	)

As of December 31, 2018 and 2017, we have a net deferred tax liability of $6.9 million and $8.2 million primarily related to the management and leasing contracts assumed in the Combination, partially offset by deferred tax assets associated with tax versus book differences, related general and administrative expenses and the net operating loss for 2018 and 2017. We are subject to federal, state and local income tax examinations by taxing authorities for 2015 through 2018.



	December 31,
	2018			2017
	(in thousands)
Deferred tax assets:
Accrued bonus	$	—		$	1,675
Net operating loss	2,326			1,710
Deferred revenue	998			71
Bad debt expense	583			111
Other	198			623
Total deferred tax assets	4,105			4,190
Valuation allowance	(469		)	—
Total deferred tax assets, net of valuation allowance	3,636			4,190
Deferred tax liabilities:
Management and leasing contracts	(9,905		)	(11,840		)
Other	(609		)	(552		)
Total deferred tax liabilities	(10,514		)	(12,392		)
Net deferred tax liability	$	(6,878	)	$	(8,202	)

During 2018, we established a valuation allowance attributable to a portion of the federal loss carry forward as we do not consider it more likely than not that a deferred tax asset will be realized.

During the year ended December 31, 2018, our Board of Trustees declared cash dividends totaling $1.00 (regular dividends of $0.90 per common share and a special dividend of $0.10 per common share) of which $0.42 was taxable as ordinary income for federal income tax purposes in 2018, $0.355 were capital gain distributions and the remaining $0.225 will be determined in 2019. During the year ended December 31, 2017, our Board of Trustees declared cash dividends of $0.45 per common share of which $0.385 was taxable as ordinary income for federal income tax purposes in 2017 and $0.065 were capital gains distributions. No dividends were declared or paid in 2016.