Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 15.Income Taxes

The components of our provision for income taxes for the periods presented are as follows (in thousands):

	Years Ended December 31,
	2011		2010		2009
Federal
Current	$	17,834	$	17,737	$	19,796
Deferred		6,867		(2,409)		(6,388)
		24,701		15,328		13,408
State, Local and Foreign
Current		10,545		12,243		12,713
Deferred		1,968		(1,756)		(3,337)
		12,513		10,487		9,376
Total Provision	$	37,214	$	25,815	$	22,784

Deferred income taxes at December 31, 2011 and2010consist of the following (in thousands):

	At December 31,
	2011		2010
Deferred tax assets
Unearned and deferred compensation	$	12,598	$	14,937
Other		3,465		82
		16,063		15,019
Deferred tax liabilities
Receivables from affiliates		(14,378)		(14,290)
Investments		(45,812)		(35,267)
Other		-		(755)
		(60,190)		(50,312)
Net deferred tax liability	$	(44,127)	$	(35,293)

A reconciliation of the provision for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes for the periods presented is as follows (in thousands):

	Years Ended December 31,
	2011			2010			2009
Pre-tax income from taxable subsidiaries	$	78,561		$	49,253		$	41,943
Federal provision at statutory tax rate (35%)		27,496	35.0%		17,238	35.0%		14,680	35.0%
State and local taxes, net of federal benefit		7,409	9.4%		4,303	8.7%		4,246	10.1%
Amortization of intangible assets		486	0.6%		854	1.7%		855	2.0%
Other		286	0.4%		272	0.6%		101	0.3%
Tax provision — taxable subsidiaries		35,677	45.4%		22,667	46.0%		19,882	47.4%
Other state, local and foreign taxes		1,537			3,148			2,902
Total provision	$	37,214		$	25,815		$	22,784

Included in Income taxes, net in the consolidated balance sheets at December 31, 2011 and 2010 are accrued income taxes totaling $0.7 million and $6.1 million, respectively, and deferred income taxes totaling $44.1 million and $35.3 million, respectively.

We have elected to be treated as a partnership for U.S. federal income tax purposes. As partnerships, we and our partnership subsidiaries are generally not directly subject to tax. We conduct our investment management services primarily through taxable subsidiaries. These operations are subject to federal, state, local and foreign taxes, as applicable. We conduct business in the U.S. and the European Union, and as a result, we or one or more of our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and certain foreign jurisdictions. Certain of our inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation. Periodically, shares in the REITs that are payable to our taxable subsidiaries in consideration for services rendered are distributed from these subsidiaries to us.

At January 1, 2010, we had unrecognized tax benefits of $0.6 million (net of federal benefits), if recognized, would affect our effective tax rate. During 2010, we reversed the unrecognized tax benefits, including all related interest totaling $0.1 million, as they were no longer required.

Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years 2008 through 2011 remain open to examination by the major taxing jurisdictions to which we are subject.

Our subsidiary, Carey REIT II, owns our real estate assets and has elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code. In connection with the CPA®:14/16 Mergerin May 2011, we formed Carey REIT IIIto hold the Special Member Interest in the newly formed operating partnership of CPA®:16 – Global (Note 3). Carey REIT III has also elected to be taxed as a real estate investment trust under the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner that allows Carey REIT II and Carey REIT III to continue to qualify as real estate investment trusts. Under the real estate investment trust operating structure, Carey REIT II and Carey REIT III are permitted to deduct distributions paid to our shareholders and generally will not be required to pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements related to either Carey REIT IIor Carey REIT III.