Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Summary of Combined Activity TRS

The following represents the combined activity of the Company’s TRS and its taxable activity in Puerto Rico (in thousands):

	For the Year Ended December 31,
	2012			2011		2010
Book (loss) income before income taxes — TRS	$	(16,934	)	$	4,738	$	(22,843	)

Summary of Components of Income Tax (Benefit) Expense

Components of income tax expense (benefit) are as follows:

Current:
Federal	$	—		$	351		$	(1,775	)
State and local		—			—			—
		—			351			(1,775	)
Deferred:
Federal		—			—			45,311
State and local		—			—			6,663
		—			—			51,974
Total expense (benefit) — TRS	$	—		$	351		$	50,199
Book loss before income taxes — Puerto Rico	$	(19,738	)	$	(20,835	)	$	(17,276	)
Current	$	—		$	—		$	—
Deferred		—			—			—
Total expense (benefit) — Puerto Rico	$	—		$	—		$	—

Summary of Differences Between Total Income Tax Expense Statutory Federal Income Tax Rate

The differences between total income tax expense or benefit and the amount computed by applying the statutory federal income tax rate to income before taxes were as follows (in thousands):

	For the Year Ended December 31,
	2012			2011			2010
Statutory rate of 34% applied to pre-tax (loss) income	$	(5,757	)	$	1,611		$	(7,767	)
Effect of state and local income taxes, net of federal tax benefit		(847	)		237			(1,142	)
Valuation allowance increase (decrease)		16,808			(715	)		58,322
Other		(10,204	)		(782	)		786
Total expense — TRS	$	—		$	351		$	50,199
Effective tax rate		0.00	%		7.40	%		(219.76	)%(A)

(A) The 2010 effective tax rate includes the impact from the recording of the valuation allowance in the fourth quarter 2010. Without this impact, the effective tax rate was approximately 37.59%.

Summary of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities of the Company’s TRS and Puerto Rico were as follows (in thousands):

	For the Year Ended December 31,
	2012			2011			2010
Deferred tax assets — TRS	$	75,450		$	58,297		$	58,923
Deferred tax assets — Puerto Rico		34,041			—			—
Deferred tax liabilities — TRS		(1,035	)		(690	)		(601	)
Deferred tax liabilities — Puerto Rico		(26,992	)		—			—
Valuation allowance — TRS		(74,415	)		(57,607	)		(58,322	)
Valuation allowance — Puerto Rico		(7,049	)		—			—
Net deferred tax asset(A)	$	—		$	—		$	—

(A) The components of the net deferred tax assets are primarily attributable to net operating losses, Puerto Rico special partnership losses and interest expense, subject to limitations and basis differentials in assets due to purchase price accounting.

Reconciliation of GAAP Net Loss Attributable to Taxable Income

Reconciliation of GAAP net loss attributable to DDR to taxable income is as follows (in thousands):

	For the Year Ended December 31,
	2012			2011			2010
GAAP net loss attributable to DDR	$	(25,822	)	$	(15,854	)	$	(209,358	)
Plus: Book depreciation and amortization(A)		247,084			222,751			217,035
Less: Tax depreciation and amortization(A)		(185,230	)		(181,935	)		(179,377	)
Book/tax differences on gains/losses from capital transactions		(122,101	)		(116,395	)		(103,331	)
Joint venture equity in (loss) earnings, net(A)		(23,885	)		19,190			(28,659	)
Dividends from subsidiary REIT investments		480			954			1,609
Deferred income		8,471			(4,327	)		1,937
Compensation expense		(11,325	)		(17,614	)		1,199
Impairment charges		153,142			128,765			172,127
Equity derivative instrument valuation		—			(21,926	)		40,157
Senior Convertible Notes interest expense		10,884			14,914			8,204
Miscellaneous book/tax differences, net		(2,755	)		(12,131	)		(12,007	)
Taxable income (loss) before adjustments		48,943			16,392			(90,464	)
Less: Capital Gains		(48,943	)		—			—
Less: Taxable loss carried forward(B)		—			—			90,464
Taxable income subject to the 90% dividend requirement	$	—		$	16,392		$	—

(A) Depreciation expense from majority-owned subsidiaries and affiliates, which is consolidated for financial reporting purposes but not for tax reporting purposes, is included in the reconciliation item “Joint venture equity in (loss) earnings, net.”

(B) The Company has net operating loss carryforwards expiring in 2030 of $90.5 million that can offset future undistributed taxable income.

Reconciliation Between Cash Dividends Paid and Dividends Paid Deduction

Reconciliation between cash dividends paid and the dividends paid deduction is as follows (in thousands):

	For the Year Ended December 31,
	2012			2011			2010
Dividends paid	$	153,617		$	75,253		$	61,204
Plus: Deemed dividends on convertible debt		7,875			—			—
Less: Dividends designated to prior year		(6,967	)		(6,967	)		(6,967	)
Plus: Dividends designated from the following year		7,030			6,967			6,967
Less: Return of capital		(112,612	)		(58,861	)		(61,204	)
Dividends paid deduction	$	48,943		$	16,392		$	—

Summary of Tax Characterization of Common Share Dividends Per Share as Reported to Shareholders

The tax characterization of common share dividends per share as reported to shareholders for the years ended December 31, 2012, 2011, and 2010, are summarized as follows:

2012 Dividends	Date Paid		Gross Ordinary Income		Capital Gain Distributions		Return of Capital		Total Dividends
4th quarter 2011		01/06/12	$	—	$	0.0122	$	0.0678	$	0.0800
1st quarter		04/03/12		—		0.0183		0.1017		0.1200
2nd quarter		07/06/12		—		0.0183		0.1017		0.1200
3rd quarter		10/02/12		—		0.0183		0.1017		0.1200
4th quarter		01/04/13		—		—		—		—
			$	—	$	0.0671	$	0.3729	$	0.4400
2011 Dividends	Date Paid		Gross Ordinary Income		Capital Gain Distributions		Return of Capital		Total Dividends
4th quarter 2010		01/05/11	$	—	$	—	$	0.0200	$	0.0200
1st quarter		04/05/11		—		—		0.0400		0.0400
2nd quarter		07/06/11		—		—		0.0400		0.0400
3rd quarter		10/11/11		—		—		0.0600		0.0600
4th quarter		01/06/12		—		—		—		—
			$	—	$	—	$	0.1600	$	0.1600
2010 Dividends	Date Paid		Gross Ordinary Income		Capital Gain Distributions		Return of Capital		Total Dividends
4th quarter 2009		01/06/10	$	—	$	—	$	0.0200	$	0.0200
1st quarter		04/06/10		—		—		0.0200		0.0200
2nd quarter		07/07/10		—		—		0.0200		0.0200
3rd quarter		10/05/10		—		—		0.0200		0.0200
4th quarter		01/05/11		—		—		—		—
			$	—	$	—	$	0.0800	$	0.0800

Puerto Rico [Member]

Summary of Differences Between Total Income Tax Expense Statutory Federal Income Tax Rate

The differences between total income tax expense or benefit and the amount computed by applying the statutory income tax rate to income before taxes with respect to its Puerto Rican activity were as follows (in thousands):

	For the Year  Ended December 31,
	2012
Statutory rate of 30% applied to pre-tax loss	$	(5,921	)
Valuation allowance increase		7,049
Other		(1,128	)
Total expense — Puerto Rico	$	—
Effective tax rate		0.00	%