INCOME TAXES

6 Months Ended

Jun. 30, 2020

Rayonier Inc. is a real estate investment trust (a “REIT”) under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. Through a series of transactions in connection with the Mergers, the Company transferred all of its assets to the Operating Partnership on May 8, 2020. As a result of these transactions, the Company owns approximately 96.8% of the Operating Partnership and conducts substantially all of its business through the Operating Partnership. The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return. Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through taxable REIT subsidiary (“TRS”) entities. The TRS entities are subject to United States federal and state corporate income tax. The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax in New Zealand and is treated as a partnership for US income tax purposes.

PROVISION FOR INCOME TAXES

Our tax expense is principally related to New Zealand corporate-level tax on the New Zealand subsidiary income. The following table contains the income tax expense recognized in the Consolidated Statements of Income and Comprehensive Income:


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Income tax expense	($2,990)	($3,608)	($6,696)	($7,958)

ANNUAL EFFECTIVE TAX RATE

The Company’s effective tax rate after discrete items is below the 21.0% U.S. statutory rate due to tax benefits associated with being a REIT. The following table contains the Company’s annualized effective tax rate after discrete items:


	Six Months Ended June 30,
	2020		2019
Annualized effective tax rate after discrete items	19.8	%	15.5	%

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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