Income Taxes

12 Months Ended

Dec. 31, 2018

Piedmont’s income tax basis net income for the years ended December 31, 2018, 2017, and 2016, is calculated as follows (in thousands):



	2018			2017			2016
GAAP basis financial statement net income	$	130,296		$	133,564		$	99,732
Increase/(decrease) in net income resulting from:
Depreciation and amortization expense recognized for financial reporting purposes in excess of amounts recognized for income tax purposes	54,420			62,916			69,214
Rental income accrued for income tax purposes less than amounts for financial reporting purposes	(9,681		)	(25,432		)	(18,964		)
Net amortization of above/below-market lease intangibles for income tax purposes in excess of amounts for financial reporting purposes	(7,453		)	(6,041		)	(4,895		)
Gain on disposal of property for financial reporting purposes less than/(in excess of) amounts for income tax purposes	(36,241		)	10,068			(118,713		)
Taxable income or loss of Piedmont Washington Properties, Inc., in excess of/(less than) amount for financial reporting purposes	(2,089		)	176			(1,042		)
Other expenses, including impairment loss on real estate assets, for financial reporting purposes in excess of/ (less than) amounts for income tax purposes	(37,394		)	49,859			42,019
Taxable income for POH in excess of/(less than) amount for financial reporting purposes	(64		)	(28		)	648
Income tax basis net income, prior to dividends paid deduction	$	91,794		$	225,082		$	67,999

For income tax purposes, dividends to common stockholders are characterized as ordinary income, capital gains, or as a return of a stockholder’s invested capital. The composition of Piedmont’s distributions per common share is presented below:



	2018		2017		2016
Ordinary income	100.00	%	53.61	%	81.77	%
Return of capital	—	%	—	%	18.23	%
Capital gains	—	%	46.39	%	—	%
	100	%	100	%	100	%

As of December 31, 2018 and 2017, the tax basis carrying value of Piedmont’s total assets was approximately $3.6 billion and $4.2 billion, respectively.

Approximately $2.4 million and $3.8 million of accrued interest and penalties related to uncertain tax positions was included in accounts payable, accrued expenses, and accrued capital expenditures in the accompanying consolidated balance sheets as of December 31, 2018 and 2017, respectively. Piedmont recognized approximately $1.4 million and $0.1 million of recoveries of previously recorded estimated accrued interest and penalties during the year ended December 31, 2018 and 2017, respectively, and no additional expense or recoveries for the year ended December 31, 2016, related to such positions. The tax years 2015 to 2017 remain open to examination by various federal and state taxing authorities.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act ("H.R. 1"), which generally took effect for taxable years that began on or after January 1, 2018 (subject to certain exceptions), made many significant changes to the U.S. federal income tax laws that profoundly impact the taxation of individuals and corporations (including both regular C corporations and corporations that have elected to be taxed as REITs). There are numerous interpretive issues related to H.R. 1 and the IRS continues to issue clarifying guidance; however, Piedmont has completed its initial taxable income estimates for the year ended December 31, 2018 and none of the revisions resulting from

H.R. 1 were significant enough to warrant a change to Piedmont's current distribution policy. However, Piedmont did record an approximate $0.2 million reduction to its tax liability related to its taxable REIT subsidiary as a result of the rate reduction included in H.R. 1 during the year ended December 31, 2018.