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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 13 – INCOME TAXES

We have elected to be taxed as a REIT under the applicable provisions of the Code for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as TRS entities, which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this note. Certain REIT entities are subject to foreign income tax.

Although we intend to continue to operate in a manner that will enable us to qualify as a REIT, such qualification depends upon our ability to meet, on a continuing basis, various distribution, stock ownership and other tests. Our tax treatment of distributions per common share was as follows:
For the Years Ended December 31,
202420232022
Tax treatment of distributions:   
Ordinary income$— $— $— 
Qualified ordinary income— 0.04468 0.04906 
199A qualified business income1.09580 1.49465 1.75094 
Long-term capital gain— 0.09136 — 
Non-dividend distribution0.70420 0.16931 — 
Distribution reported for 1099-DIV purposes1.80000 1.80000 1.80000 
Add: Dividend declared in current year and taxable in following year0.45000 0.45000 0.45000 
Less: Dividend declared in prior year and taxable in current year(0.45000)(0.45000)(0.45000)
Distribution declared per common share outstanding$1.80000 $1.80000 $1.80000 

We believe we have met the annual REIT distribution requirement by payment of at least 90% of our estimated taxable income for 2024, 2023 and 2022. Our consolidated expense (benefit) for income taxes was as follows (dollars in thousands):
For the Years Ended December 31,
202420232022
Current - Federal $324 $534 $(2,257)
Current - State2,630 2,564 2,662 
Deferred - Federal (30,436)(6,135)338 
Deferred - State28 230 1,310 
Current - Foreign2,646 2,587 3,217 
Deferred - Foreign(12,967)(9,319)(22,196)
Total$(37,775)$(9,539)$(16,926)

The 2024 income tax benefit is primarily due to losses in certain of our TRS entities and a $28.6 million change in valuation allowance due to purchase accounting activity. The 2023 income tax benefit is primarily due to losses in certain of our TRS entities and a $3.2 million benefit from internal restructurings of U.S. TRS entities. The 2022 income tax benefit is primarily due to losses at certain TRS entities and an income tax benefit of $11.9 million from an internal restructuring of foreign TRS entities.

Although the TRS entities and certain other foreign entities have paid minimal cash federal, state and foreign income taxes for the year ended December 31, 2024, their income tax liabilities may increase in future years as we exhaust net operating loss (“NOL”) carryforwards and as our operations grow. Such increases could be significant.
A reconciliation of income tax expense and benefit, which is computed by applying the federal corporate tax rate for the years ended December 31, 2024, 2023 and 2022, to the income tax expense and benefit is as follows (dollars in thousands):
For the Years Ended December 31,
202420232022
Tax at statutory rate on earnings from continuing operations before unconsolidated entities, noncontrolling interest and income taxes
$(1,679)$(24,272)$(19,733)
State income taxes, net of federal benefit2,641 (839)(5,411)
Change in valuation allowance
(10,593)20,330 53,117 
Tax at statutory rate on earnings not subject to federal income taxes(18,773)(7,809)(31,528)
Foreign rate differential and foreign taxes1,813 43 123 
Change in tax status of TRS— 9,171 (1,961)
Other differences(11,184)(6,163)(11,533)
Income tax benefit$(37,775)$(9,539)$(16,926)

Each TRS is a tax-paying component for purposes of classifying deferred tax assets and liabilities. The tax effects of temporary differences and carryforwards included in the net deferred tax liabilities are summarized as follows (dollars in thousands):
As of December 31,
202420232022
Property, primarily differences in depreciation and amortization, the tax basis of land assets and the treatment of interests and certain costs
$(73,214)$(26,071)$(34,734)
Operating loss and interest deduction carryforwards236,424 233,847 220,891 
Expense accruals and other56,546 26,700 16,723 
Valuation allowance(225,975)(257,222)(227,960)
Net deferred tax liabilities $(6,219)$(22,746)$(25,080)

Our net deferred tax liability decreased $16.5 million during 2024 primarily due to the impact of operating losses at certain TRS entities and an increase in deferred tax assets of $18.0 million due to tax law changes in Canada regarding the deductibility of interest and financing expenses. Our net deferred tax liability decreased $1.7 million during 2023 primarily due to the impact of operating losses at certain TRS entities and the reversal of $3.2 million of net deferred tax liabilities from an internal restructuring of TRS entities, partially offset by an increase of $12.4 million in connection with our equitization of the Santerre Mezzanine Loan on May 1, 2023. Our net deferred tax liability decreased $23.0 million during 2022 primarily due to the impact of operating losses at certain TRS entities and the reversal of $11.9 million of deferred tax liabilities from an internal restructuring of foreign TRS entities.

Due to uncertainty regarding the realization of certain deferred tax assets, we have established valuation allowances, primarily in connection with the NOL carryforwards related to certain TRSs. The amounts related to NOLs at the TRS entities for 2024, 2023 and 2022 are $180.8 million, $179.0 million and $171.0 million, respectively.

We are subject to corporate-level taxes (“built-in gains tax”) for any asset dispositions during the five-year period immediately after the assets were owned by a C corporation (either prior to our REIT election, through stock acquisition or merger). The amount of income potentially subject to built-in gains tax is generally equal to the lesser of the excess of the fair value of the asset over its adjusted tax basis as of the date it became a REIT asset or the actual amount of gain. Some, but not all, future gains could be offset by available NOL carryforwards.

At December 31, 2024, 2023 and 2022, the REIT had NOL carryforwards of $1.0 billion, $1.1 billion and $1.1 billion, respectively. Additionally, the REIT has $10.8 million of federal income tax credits that were carried over from acquisitions at December 31, 2024, 2023 and 2022. These amounts can be used to offset future taxable income (or taxable income for prior years if an audit determines that tax is owed), if any. The REIT will be entitled to utilize NOLs and tax credit carryforwards only to the extent that REIT taxable income exceeds our deduction for dividends paid. Certain NOL and credit carryforwards are limited as to their utilization by Section 382 of the Code. The remaining REIT carryforwards began to expire in 2023.
For the years ended December 31, 2024 and 2023, the net difference between tax bases and the reported amount of REIT assets and liabilities for federal income tax purposes was approximately $1.8 billion and $2.2 billion, respectively, less than the book bases of those assets and liabilities for financial reporting purposes.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service (“IRS”) for the year ended December 31, 2021, and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2020 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for the year ended December 31, 2020 and subsequent years. We are subject to audit in the United Kingdom generally for the periods ended in and subsequent to 2023.

The following table summarizes the activity related to our unrecognized tax benefits (dollars in thousands):
20242023
Balance as of January 1$5,205 $5,828 
Additions to tax positions related to prior years— 108 
Subtractions to tax positions related to prior years(1,242)(731)
Balance as of December 31$3,963 $5,205 

If recognized, these unrecognized tax benefits of $4.0 million and $5.2 million at December 31, 2024 and 2023, respectively, would reduce our annual effective tax rate. We accrued no interest or penalties related to the unrecognized tax benefits during 2024. We do not expect our unrecognized tax benefits to increase or decrease materially in 2025.

As a part of the transfer pricing structure in the normal course of business, the REIT enters into transactions with certain TRSs, such as leasing and sub-management transactions, other capital financing and allocation of general and administrative costs, which transactions are intended to comply with the IRS and foreign tax authority transfer pricing rules.