Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

10. Income Taxes

The Company has elected to be taxed as a REIT effective January 1, 2013, pursuant to the U.S. Internal Revenue Code of 1986, as amended. As a REIT, the Company generally will not be subject to federal corporate income taxes on ordinary taxable income and capital gains income from real estate investments that it distributes to its stockholders. The Company pays federal and state corporate income taxes on earnings of its taxable REIT subsidiaries (“TRSs”).

The income tax provision for continuing operations consists of the following (amounts in thousands):

	2022		2021		2020
CURRENT:
Federal	$	(21,936)	$	126	$	(101)
State		(8,595)		(1,077)		(457)
Total current provision		(30,531)		(951)		(558)
DEFERRED:
Federal		(9,115)		(3,646)		(13,565)
State		871		(360)		(12,961)
Total deferred provision		(8,244)		(4,006)		(26,526)
Total provision for income taxes	$	(38,775)	$	(4,957)	$	(27,084)

Due to the financial statement impact of the COVID-19 pandemic, and in connection with the preparation of the consolidated financial statements included herein, the Company reassessed the realizability of net deferred tax assets during 2020. As a result, the Company’s tax provision for 2020 includes $26.7 million in expense related to the recording of a valuation allowance on the 2020 beginning net deferred tax assets of its TRSs.

The Company is required to distribute at least 90% of its annual taxable income, excluding net capital gains, to its stockholders in order to maintain its qualification as a REIT. The taxability of distributions to stockholders is determined by the Company’s earnings and profits, which differs from net income (loss) reported for financial reporting purposes.

The Company made no cash distributions in 2021. The estimated taxability of cash distributions to common shareholders is shown in the table below (per common share) (unaudited).

	2022		2021		2020
Ordinary income	$	0.28	$	—	$	—
Capital gains		0.07		—		0.05
Return of capital		—		—		1.80
	$	0.35	$	—	$	1.85

The differences between the income tax provision calculated at the statutory U.S. federal income tax rate of 21% and the actual income tax provision recorded for continuing operations are as follows (amounts in thousands):

	2022		2021		2020
Statutory federal income tax (provision) benefit	$	(36,482)	$	39,868	$	91,085
Adjustment for nontaxable income of the REIT		3,565		(16,379)		(33,116)
Adjustment for noncontrolling interest in consolidated joint venture		—		(1,834)		(5,010)
State tax (provision) benefit (net of federal taxes)		(13,597)		8,581		5,876
Permanent share-based compensation adjustment		440		329		(579)
Other permanent items		(365)		(281)		(200)
Change in federal valuation allowance		1,914		(25,698)		(65,368)
Change in state valuation allowance (net of federal taxes)		5,873		(9,264)		(19,293)
Other		(123)		(279)		(479)
	$	(38,775)	$	(4,957)	$	(27,084)

Significant components of the Company’s deferred tax assets and liabilities at December 31 are as follows (amounts in thousands):

	2022		2021
DEFERRED TAX ASSETS:
Accounting reserves and accruals	$	26,293	$	26,340
Defined benefit plan		2,215		1,074
Deferred management rights proceeds		42,875		43,009
Federal and State net operating loss carryforwards		97,832		105,484
Tax credits and other carryforwards		5,182		1,484
Other assets		5,124		4,477
Total deferred tax assets		179,521		181,868
Valuation allowance		(118,015)		(125,387)
Total deferred tax assets, net of valuation allowance		61,506		56,481
DEFERRED TAX LIABILITIES:
Property and equipment, net		67,744		57,035
Investment in joint ventures		518		101
Other liabilities		6,159		4,016
Total deferred tax liabilities		74,421		61,152
Net deferred tax liabilities	$	(12,915)	$	(4,671)

TRS federal net operating loss carryforwards at December 31, 2022 totaled $349.0 million, resulting in a deferred tax asset of $73.3 million. Of the total TRS federal net operating loss carryforwards, $22.2 million were created prior to 2018 and can be used to offset 100% of taxable income in the future. These federal net operating loss carryforwards will expire between 2034 and 2037. The remaining $326.8 million of federal net operating loss carryforwards have no expiration date and can be used to offset 80% of taxable income in the future. All available federal operating loss carryforwards at the REIT were used to reduce taxable REIT income subject to distribution in 2022. As a result, the REIT has no federal net operating losses as of December 31, 2022. The use of certain federal net operating losses, credits and other deferred tax assets is limited to the Company’s future taxable earnings. As a result, a valuation allowance has

been provided for certain federal deferred tax assets. The valuation allowance related to federal deferred tax assets increased (decreased) $(1.6) million, $23.0 million and $65.9 million in 2022, 2021 and 2020, respectively.

State net operating loss carryforwards at December 31, 2022 totaled $494.0 million, resulting in a deferred tax benefit of $24.6 million, which will expire between 2024 and 2037. The use of certain state net operating losses, credits and other state deferred tax assets is limited to the future taxable earnings of separate legal entities. As a result, a valuation allowance has been provided for certain state deferred tax assets, including loss carryforwards. The valuation allowance related to state deferred tax assets increased (decreased) $(5.8) million, $4.7 million and $19.4 million in 2022, 2021 and 2020, respectively.

The Company has concluded IRS examinations of the TRS through the 2015 tax year. For federal income tax purposes and substantially all the states with which the Company has nexus, the statute of limitations has expired through 2018. However, the Company has state net operating loss carryforwards from closed years, which could be adjusted upon audit. The Company is routinely subject to other various jurisdictional income tax audits; however, there were no outstanding state or local audits at December 31, 2022. In addition, the Company has evaluated the effects of the Inflation Reduction Act and believes that it has no material effect on the Company’s financial statements.

At December 31, 2022 and 2021, the Company had no accruals for unrecognized tax benefits. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. At December 31, 2022 and 2021, the Company has accrued no interest or penalties related to uncertain tax positions.