Income Taxes

12 Months Ended

Dec. 31, 2023

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) benefit for continuing operations consists of the following (amounts in thousands):

	2023		2022		2021
CURRENT:
Federal	$	797	$	(21,936)	$	126
State		(2,920)		(8,595)		(1,077)
Total current provision		(2,123)		(30,531)		(951)
DEFERRED:
Federal		79,710		(9,115)		(3,646)
State		16,115		871		(360)
Total deferred (provision) benefit		95,825		(8,244)		(4,006)
Total (provision) benefit for income taxes	$	93,702	$	(38,775)	$	(4,957)

The Company evaluates its deferred tax assets each reporting period to determine if it is more likely than not that those assets will be realized or if a valuation allowance is needed. In the fourth quarter of 2023, due to continued improvement in the Company’s financial results coming out of the COVID-19 pandemic and the projected future taxable income of its TRSs, the Company determined that the release of a significant portion of its federal and state valuation allowance was appropriate. This release of valuation allowance of $112.5 million was the primary factor in the income tax benefit for 2023.

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 stockholders is shown in the table below (per common share) (unaudited).

	2023		2022		2021
Ordinary income	$	3.75	$	0.28	$	—
Capital gains		0.10		0.07		—
Return of capital		—		—		—
	$	3.85	$	0.35	$	—

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

	2023		2022		2021
Statutory federal income tax (provision) benefit	$	(52,101)	$	(36,482)	$	39,868
Adjustment for nontaxable income of the REIT		44,968		3,565		(16,379)
Adjustment for noncontrolling interest in consolidated joint venture		—		—		(1,834)
State tax (provision) benefit (net of federal taxes)		(11,934)		(13,597)		8,581
Permanent share-based compensation adjustment		34		440		329
Other permanent items		(531)		(365)		(281)
Change in federal valuation allowance		87,330		1,914		(25,698)
Change in state valuation allowance (net of federal taxes)		25,128		5,873		(9,264)
Other		808		(123)		(279)
	$	93,702	$	(38,775)	$	(4,957)

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

	2023		2022
DEFERRED TAX ASSETS:
Accounting reserves and accruals	$	22,371	$	23,095
Pension plans		4,249		5,413
Deferred management rights proceeds		40,280		42,875
Federal and State net operating loss carryforwards		102,032		97,832
Tax credits and other carryforwards		8,881		5,182
Other assets		6,205		5,124
Total deferred tax assets		184,018		179,521
Valuation allowance		(5,557)		(118,015)
Total deferred tax assets, net of valuation allowance		178,461		61,506
DEFERRED TAX LIABILITIES:
Property and equipment, net		91,314		67,744
Other liabilities		5,523		6,677
Total deferred tax liabilities		96,837		74,421
Net deferred tax assets (liabilities)	$	81,624	$	(12,915)

TRS federal net operating loss carryforwards at December 31, 2023 totaled $399.7 million, resulting in a deferred tax asset of $83.9 million, and do not expire. All available federal operating loss carryforwards at the REIT were used to reduce taxable REIT income subject to distribution in 2022. The REIT has no federal net operating losses as of December 31, 2023. 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) $(87.3) million, $(1.6) million and $23.0 million in 2023, 2022 and 2021, respectively.

State net operating loss carryforwards at December 31, 2023 totaled $546.8 million, resulting in a deferred tax benefit of $18.1 million, which will expire between 2024 and 2043. 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) $(25.1) million, $(5.8) million and $4.7 million in 2023, 2022 and 2021, 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 2019. However, the Company has federal and 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, 2023. In addition, the Company has evaluated the effects of the Inflation Reduction Act signed into law in 2022 and believes that it has no material effect on the Company’s financial statements.

At December 31, 2023 and 2022, 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, 2023 and 2022, the Company has accrued no interest or penalties related to uncertain tax positions.