Income Tax Considerations (Tables)

12 Months Ended

Dec. 31, 2013

The following table reconciles net income adjusted for noncontrolling interests to REIT taxable income (in thousands):



	Year Ended December 31,
	2013			2012			2011
Net income adjusted for noncontrolling interests	$	220,262		$	146,640		$	15,621
Net (income) loss of taxable REIT subsidiary included above	(4,684		)	11,457			32,043
Net income from REIT operations	215,578			158,097			47,664
Book depreciation and amortization including discontinued operations	157,665			148,413			157,290
Tax depreciation and amortization	(90,047		)	(92,797		)	(100,633		)
Book/tax difference on gains/losses from capital transactions	(33,969		)	(55,242		)	(13,398		)
Deferred/prepaid/above and below-market rents, net	(6,429		)	(4,264		)	(13,088		)
Impairment loss from REIT operations including discontinued operations	474			11,396			58,353
Other book/tax differences, net	(9,695		)	1,430			(3,652		)
REIT taxable income	233,577			167,033			132,536
Dividends paid deduction⁽¹⁾	(233,577		)	(173,202		)	(165,721		)
Dividends paid in excess of taxable income	$	—		$	(6,169	)	$	(33,185	)

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(1)	For 2013, the dividends paid deduction includes designated dividends of $67.7 million from 2014.

For federal income tax purposes, the cash dividends distributed to common shareholders are characterized as follows:

Our deferred tax assets and liabilities, including a valuation allowance, consisted of the following (in thousands):



	December 31,
	2013			2012
Deferred tax assets:
Impairment loss ⁽¹⁾	$	17,692		$	16,951
Allowance on other assets	1,168			1,519
Interest expense	12,842			11,417
Net operating loss carryforwards ⁽²⁾	8,814			8,642
Book-tax basis differential	886			1,148
Other	241			173
Total deferred tax assets	41,643			39,850
Valuation allowance ⁽³⁾	(30,541		)	(28,376		)
Total deferred tax assets, net of allowance	$	11,102		$	11,474
Deferred tax liabilities:
Straight-line rentals	$	696		$	977
Book-tax basis differential	8,252			2,339
Other	167			2
Total deferred tax liabilities	$	9,115		$	3,318

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(1)	Impairment losses will not be recognized until the related properties are sold and realization is dependent upon generating sufficient taxable income in the year the property is sold.


(2)	We have net operating loss carryforwards of $25.2 million that expire between the years of 2029 and 2033.


(3)	Management believes it is more likely than not that a portion of the deferred tax assets, which primarily consists of impairment losses, interest expense and net operating losses, will not be realized and established a valuation allowance. However, the amount of the deferred tax asset considered realizable could be reduced if estimates of future taxable income are reduced.

We are subject to federal, state and local income taxes and have recorded an income tax provision as follows (in thousands):



	Year Ended December 31,
	2013		2012			2011
Net income (loss) before taxes of taxable REIT subsidiary	$	10,688	$	(12,894	)	$	(32,043	)
Federal provision (benefit) at statutory rate of 35%	$	3,741	$	(4,513	)	$	(11,215	)
Valuation allowance increase	2,165		3,781			8,776
Other	98		(705		)	1,523
Federal income tax provision (benefit) of taxable REIT subsidiary ⁽¹⁾	6,004		(1,437		)	(916		)
Texas franchise tax ⁽²⁾	1,370		1,784			1,373
Total	$	7,374	$	347		$	457

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(1)	All periods presented are open for examination by the IRS.


(2)	For all periods presented, amounts include the effects that are reported in discontinued operations. See Note 15 for additional information.