Income Taxes (Notes)

12 Months Ended

Dec. 31, 2019

Income Taxes

We have elected to be taxed as a REIT, and accordingly, we have incurred no federal income tax expense related to our REIT subsidiaries except for 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 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, 2019, our TRSs have an estimated federal and state net operating loss of $3.6 million, which will expire in 2038 and 2039. The net basis of our assets and liabilities for tax reporting purposes is approximately $55.9 million higher than the amounts reported in our balance sheet as of December 31, 2019.

The following is a summary of our income tax benefit:



	Year Ended December 31,
	2019			2018		2017
	(in thousands)
Current tax benefit (expense)	$	(34	)	$	20	$	(496	)
Deferred tax benefit	1,336			718		10,408
Income tax benefit	$	1,302		$	738	$	9,912

As of December 31, 2019 and 2018, we have a net deferred tax liability of $5.5 million and $6.9 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 remaining from 2018 and 2017. We are subject to federal, state and local income tax examinations by taxing authorities for 2016 through 2019.



	December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Accrued bonus	$	721		$	—
Net operating loss	915			2,326
Deferred revenue	626			998
Bad debt expense	—			583
Charitable contributions	435			—
Other	217			198
Total deferred tax assets	2,914			4,105
Valuation allowance	(523		)	(469		)
Total deferred tax assets, net of valuation allowance	2,391			3,636
Deferred tax liabilities:
Management and leasing contracts	(7,412		)	(9,905		)
Other	(521		)	(609		)
Total deferred tax liabilities	(7,933		)	(10,514		)
Net deferred tax liability	$	(5,542	)	$	(6,878	)

During the year ended December 31, 2019, our Board of Trustees declared cash dividends totaling $0.90 of which $0.333 was taxable as ordinary income for federal income tax purposes, $0.342 were capital gain distributions and the remaining $0.225 will be determined in 2020. 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 $0.531 was taxable as ordinary income for federal income tax purposes and $0.469 were capital gain distributions. 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 and $0.065 were capital gains distributions.