INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 22.       INCOME TAXES

The Company elected to be taxed as a REIT for U.S. federal income tax purposes under the Code commencing with its taxable year ended December 31, 2020. The Company believes that, commencing with such taxable year, it has been organized and has operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws. The Company intends to continue to operate in such a manner. As a REIT, the Company will be subject to U.S. federal and state income taxation at corporate rates on its net taxable income; the Company, however, may claim a deduction for the amount of dividends paid to its stockholders. Amounts distributed as dividends by the Company will be subject to taxation at the stockholder level only. While the Company must distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, to qualify as a REIT, the Company intends to distribute all of its net taxable income. The Company is allowed certain other non-cash deductions or adjustments, such as depreciation expense, when computing its REIT taxable income and distribution requirement. These deductions permit the Company to reduce its dividend payout requirement under U.S. federal income tax laws. Certain states may impose minimum franchise taxes. To comply with certain REIT requirements, the Company holds certain of its non-REIT assets and operations through taxable REIT subsidiaries (“TRSs”) and subsidiaries of TRSs, which will be subject to applicable U.S. federal, state and local corporate income tax on their taxable income. For the periods presented, the Company held a total of five TRSs subject to taxation. The Company’s TRSs will file tax returns separately as C-Corporations.

As a result of the Company’s election to be taxed as a REIT, during the year ended December 31, 2020, an $82.5 million deferred tax benefit was recorded to de-recognize the deferred tax assets and liabilities associated with the entities included in the REIT. A significant portion of the deferred tax benefit recognized related to the de-recognition of deferred tax liabilities resulting from Code Section 1031 like-kind exchanges (“1031 Exchanges”). The Company will be subject to corporate income taxes related to assets held by it that are sold during the 5-year period following the date of conversion to the extent such sold assets had a built-in gain as of January 1, 2020. The Company generally does not intend to dispose of any REIT assets after the REIT conversion within the 5-year period, unless various tax planning strategies, including 1031 Exchanges or other deferred tax structures are available to mitigate the built-in gain tax liability of conversion.

Total income tax benefit (expense) are summarized as follows (in thousands):

	Year Ended December 31,
	2021		2020		2019
Income Tax (Expense) Benefit from Continuing Operations	$	3,079	$	83,499	$	(5,472)
Income Tax Expense from Discontinued Operations		—		—		(32,641)
Total Consolidated Income Tax Benefit (Expense)	$	3,079	$	83,499	$	(38,113)

The provisions for income tax benefit (expense) from continuing operations are summarized as follows (in thousands):  

	2021				2020				2019
	Current		Deferred		Current		Deferred		Current		Deferred
Federal	$	235	$	2,362	$	341	$	70,106	$	(225)	$	(4,974)
State		44		438		63		12,989		20		(293)
Total	$	279	$	2,800	$	404	$	83,095	$	(205)	$	(5,267)

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The sources of these differences and the related deferred income tax assets (liabilities) are summarized as follows (in thousands):

	Deferred Tax
	2021		2020
Deferred Income Tax Assets
Capital Loss Carryforward	$	2,249	$	—
Net Operating Loss Carryforward		291		1,103
Gross Deferred Income Tax Assets		2,540		1,103
Less - Valuation Allowance		(2,249)		—
Net Deferred Income Tax Assets		291		1,103
Deferred Income Tax Liabilities
Basis Differences in Joint Ventures		—		(4,624)
Basis Differences in Mitigation Credit Assets		(774)		—
Total Deferred Income Tax Liabilities		(774)		(4,624)
Net Deferred Income Tax Liabilities	$	(483)	$	(3,521)

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the realization of future taxable income during the periods in which those temporary differences become deductible. We consider past history, the scheduled reversal of taxable temporary differences, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2021 and 2020, the Company has $0.3 million and $1.1 million in net operating loss (“NOL”) carryforwards, respectively. The Tax Cuts and Jobs Act allows for indefinite carryforwards for all NOLs generated in taxable years beginning after December 31, 2017. Additionally, there is no taxable income limitation, thus allowing an NOL carryforward to fully offset taxable income in tax years beginning before January 1, 2021. Accordingly, as of December 31, 2021 and 2020, no valuation allowance was considered necessary related to the Company’s NOL carryforwards. As of December 31, 2021, the Company had a capital loss carryforward totaling $9.0 million related to the elimination of the Company’s interest in the Land JV. The Company does not currently anticipate being able to utilize the capital loss carryforward and accordingly, has allowed for the $2.2 million deferred tax asset in full as of December 31, 2021.

Following is a reconciliation of the income tax computed at the federal statutory rate of 21% for 2021, 2020, and 2019, individually, for continuing operations (in thousands):

	Year Ended December 31,
	2021				2020				2019
Income Tax (Expense) Benefit Computed at Federal Statutory Rate	$	4,408	16.4	%	$	971	(19.5)	%	$	(4,410)	(20.0)	%
Increase (Decrease) Resulting from:
State Income Tax, Net of Federal Income Tax Benefit		936	3.5	%		180	(3.6)	%		(1,076)	(5.0)	%
Income Tax on Permanently Non-Deductible Items		—	0.0	%		(112)	2.2	%		(86)	(0.4)	%
Tax Benefit due to De-Recognition of REIT Deferred Tax Liabilities		—	0.0	%		82,460	(1652.6)	%		—	0.0	%
Valuation Allowance		(2,216)	(8.2)	%		—	0.0	%		—	0.0	%
Other Reconciling Items		(49)	(0.2)	%		—	0.0	%		100	0.5	%
Benefit (Expense) for Income Taxes	$	3,079	11.5	%	$	83,499	(1673.4)	%	$	(5,472)	(24.9)	%

The effective income tax rate assumes a blended rate for estimated state and local taxes on its income and property. The effective income tax rate for the years ended December 31, 2021, 2020, and 2019, including the discontinued operations, was 11.5%, 1673.4%, and (24.9)%, respectively. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in the period that they occur. The year ended December 31, 2021 included the impact of the capital loss carryforward valuation allowance. The year ended December 31, 2020 included the impact for the discrete event described above related to the de-recognition of the deferred tax assets and liabilities associated with the entities included in the REIT. There were no discrete events during the year ended December 31, 2019.

For prior taxable years through the year ended December 31, 2020, the Company has filed a consolidated income tax return in the United States Federal jurisdiction and the states of Alabama, Arizona, California, Colorado, Florida, Georgia, Maryland, Massachusetts, Nevada, New Mexico, New York, North Carolina, Oregon, Texas, Virginia, Washington, and Wisconsin. The Internal Revenue Service (“IRS”) has audited the federal tax returns through the year 2012, with all proposed adjustments settled. The Florida Department of Revenue has audited the Florida tax returns through the year 2014, with all proposed adjustments settled. For the years ended December 31, 2021, 2020, and 2019, the Company recognized no uncertain tax positions or accrued interest and penalties for uncertain tax positions. If such positions do arise, it is the Company’s intent that any interest or penalty amount related to such positions will be recorded as a component of the income tax provision (benefit) in the applicable period.

Income taxes totaling $0.4 million, $5.0 million, and $2.5 million were paid during the years ended December 31, 2021, 2020, and 2019, respectively. Additionally, income taxes totaling less than $0.1 million and $0.7 million were refunded during the years ended December 31, 2021 and 2019, respectively, with no income taxes refunded during the year ended December 31, 2020.