Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

7.Income Taxes

Due to the structure of MAA as a REIT and the nature of the operations of its operating properties, no provision for federal income taxes has been made at the MAA level. In addition, as MAALP is structured as a limited partnership, and its partners recognize their proportionate share of income or loss in their tax returns, no provision for federal income taxes has been made at the MAALP level. Historically, the Company has incurred certain state and local income, excise and franchise taxes.

Taxable REIT Subsidiaries

A TRS is an entity that is subject to federal, state and any applicable local corporate income tax without the benefit of the dividends paid deduction applicable to REITs. The Company’s TRS generated taxable income of $51.8 million, $5.8 million and $4.2 million for the years ended December 31, 2021, 2020 and 2019 and income tax expense of $10.9 million, $0.8 million and $1.0 million for the years ended December 31, 2021, 2020 and 2019. The Company’s TRS generally provide the Company with third-party services (property management services to a real estate joint venture and other services) for which the Company reimburses its TRS.

In addition, one of the Company’s TRS has investments in two technology-focused limited partnerships that generate investment income and losses. The investment income is recognized for tax purposes at the time of sale or exchange of the investment. All intercompany transactions are eliminated in the accompanying consolidated financial statements.

In addition to the TRS income tax provision, income tax expense primarily relates to the Texas-based margin tax for all Texas apartment communities. Income tax expense for the Company for the years ended December 31, 2021, 2020 and 2019 was $13.6 million, $3.3 million and $3.7 million, respectively, and is presented in “Income tax expense” in the accompanying Consolidated Statements of Operations.

As of December 31, 2021 and 2020, the components of the Company’s TRS deferred income tax assets and liabilities were as follows (dollars in thousands):

	December 31, 2021		December 31, 2020
Deferred tax asset:
Other	$	328	$	308
Deferred tax liabilities:
Unrealized gain from limited partnerships	$	12,946	$	2,087
Other		246		275
Total deferred tax liabilities	$	13,192	$	2,362
Net deferred tax liability	$	12,864	$	2,054

The net deferred tax liability balances are reflected in “Accrued expenses and other liabilities” in the accompanying Consolidated Balance Sheets for the years ended December 31, 2021 and 2020. The TRS had no reserve for uncertain tax positions for the years ended December 31, 2021 and 2020, and management does not believe there will be any material changes in the TRS’ unrecognized tax positions over the next 12 months. If necessary, the TRS accrues interest and penalties on unrecognized tax benefits as a component of income tax expense.

NOL Carryforwards

As of December 31, 2021, the Company held federal NOL carryforwards of $54.4 million for income tax purposes that expire in the years 2022 to 2032. Utilization of any NOL carryforwards is subject to an annual limitation due to ownership change limitations provided by Section 382 of the Code and similar state provisions. The annual limitations may result in the expiration of NOL carryforwards prior to utilization. The Company may use these NOLs to offset all or a portion of the taxable income generated at the REIT level. Tax years 2018 through 2021 are subject to examination by the Internal Revenue Service. No tax examination is currently in process.

Taxable Composition of Distributions

For income tax purposes, dividends paid to holders of common stock generally consist of ordinary income, return of capital, capital gains, qualified dividends and un-recaptured Section 1250 gains, or a combination thereof. For the years ended December 31, 2021, 2020 and 2019, dividends per share held for the entire year were estimated to be taxable as follows:

	2021					2020					2019
	Amount		Percentage			Amount		Percentage			Amount		Percentage
Ordinary income	$	2.43		59.18	%	$	4.00		99.98	%	$	3.51		91.39	%
Capital gain		1.36		33.15	%		0.00		0.02	%		0.21		5.54	%
Un-recaptured Section 1250 gain		0.31		7.67	%		0.00		0.00	%		0.12		3.07	%
Total	$	4.10		100	%	$	4.00		100	%	$	3.84		100	%

The Company designated the per share amounts above as capital gain dividends in accordance with the requirements of the Code. The difference between net income available to common shareholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences such as depreciation and amortization and taxable gains on sold properties.