Income Tax Considerations (Tables)

12 Months Ended

Dec. 31, 2015

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



	Year Ended December 31,
	2015			2014			2013
Net income adjusted for noncontrolling interests	$	174,352		$	288,008		$	220,262
Net loss (income) of taxable REIT subsidiary included above	340			(4,092		)	(4,684		)
Net income from REIT operations	174,692			283,916			215,578
Book depreciation and amortization including discontinued operations	145,940			150,616			157,665
Tax depreciation and amortization	(87,416		)	(90,328		)	(90,047		)
Book/tax difference on gains/losses from capital transactions	(53,902		)	(87,387		)	(33,969		)
Deferred/prepaid/above and below-market rents, net	(5,375		)	(3,617		)	(6,429		)
Impairment loss from REIT operations including discontinued operations	1,536			942			474
Other book/tax differences, net	(1,679		)	(6,399		)	(9,695		)
REIT taxable income	173,796			247,743			233,577
Dividends paid deduction⁽¹⁾	(174,628		)	(247,743		)	(233,577		)
Dividends paid in excess of taxable income	$	(832	)	$	—		$	—

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(1)	For 2014 and 2013, the dividends paid deduction includes designated dividends of $114.0 million and $67.7 million from 2015 and 2014, respectively.

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



	Year Ended December 31,
	2015		2014		2013
Ordinary income	92.7	%	54.0	%	50.5	%
Capital gain distributions	4.3	%	46.0	%	49.5	%
Return of capital (nontaxable distribution)	3.0	%	—	%	—	%
Total	100.0	%	100.0	%	100.0	%

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



	December 31,
	2015			2014
Deferred tax assets:
Impairment loss ⁽¹⁾	$	13,538		$	13,900
Allowance on other assets	100			91
Interest expense	11,707			12,701
Net operating loss carryforwards ⁽²⁾	10,071			11,024
Straight-line rentals	337			—
Book-tax basis differential	3,777			1,693
Other	421			412
Total deferred tax assets	39,951			39,821
Valuation allowance ⁽³⁾	(27,230		)	(27,539		)
Total deferred tax assets, net of allowance	$	12,721		$	12,282
Deferred tax liabilities:
Straight-line rentals	$	—		$	48
Book-tax basis differential	7,205			7,402
Other	333			387
Total deferred tax liabilities	$	7,538		$	7,837

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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 $28.7 million that expire between the years of 2029 and 2034.


(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 (benefit) as follows (in thousands):



	Year Ended December 31,
	2015			2014			2013
Net (loss) income before taxes of taxable REIT subsidiary	$	(989	)	$	1,446		$	10,688
Federal (benefit) provision at statutory rate of 35%	$	(346	)	$	506		$	3,741
Valuation allowance (decrease) increase	(309		)	(3,003		)	2,165
Other	6			(149		)	98
Federal income tax (benefit) provision of taxable REIT subsidiary ⁽¹⁾	(649		)	(2,646		)	6,004
Texas franchise tax ⁽²⁾	701			1,403			1,370
Total	$	52		$	(1,243	)	$	7,374

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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 14 for additional information.