Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Commencing January 1, 2014, the Company began operating as a REIT for U.S. income tax purposes. Since operating as a REIT, the Company filed, and intends to continue to file, as a REIT, and its TRSs filed, and intend to continue to file, as C corporations. The Company also files tax returns in various states and countries. The Company’s state tax returns reflect

different combinations of the Company’s subsidiaries and are dependent on the connection each subsidiary has with a particular state. The following information pertains to the Company’s income taxes on a consolidated basis.

Income tax expense consists of the following:

	Current		Deferred		Total
Year ended December 31, 2023
U.S. federal	$	6,223	$	1,280	$	7,503
State and local	2,035		(26)		2,009
Foreign	(860)		1,130		270
	$	7,398	$	2,384	$	9,782
Year ended December 31, 2022
U.S. federal	$	5,663	$	2,073	$	7,736
State and local	3,376		(136)		3,240
Foreign	5,201		1,275		6,476
	$	14,240	$	3,212	$	17,452
Year ended December 31, 2021
U.S. federal	$	4,723	$	620	$	5,343
State and local	3,958		254		4,212
Foreign	(999)		700		(299)
	$	7,682	$	1,574	$	9,256

As of December 31, 2023 and 2022, the Company had income taxes payable of $36 and $4,104, respectively, which was recorded within accrued expenses on the Consolidated Balance Sheets.

The U.S. and foreign components of earnings before income taxes are as follows:

	2023		2022		2021
U.S.	$	509,040	$	446,395	$	395,800
Foreign	(2,422)		9,704		1,546
Total	$	506,618	$	456,099	$	397,346

A reconciliation of significant differences between the reported amount of income tax expense and the expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 21 percent to income before taxes for the 2023, 2022 and 2021 tax years is as follows:

	2023		2022		2021
Income tax expense at U.S. federal statutory rate	$	106,390	$	95,781	$	83,443
Tax adjustment related to REIT(a)	(101,486)		(86,793)		(83,153)
State and local income taxes, net of federal income tax benefit	2,732		2,850		2,917
Book expenses not deductible for tax purposes	2,574		3,042		1,893
Stock-based compensation	513		(3,336)		3,555
Valuation allowance(b)	875		(14,984)		(1,564)
Undistributed earnings of foreign subsidiaries(c)	(95)		(84)		292
Other differences, net(d)	(1,721)		20,976		1,873
Income tax expense	$	9,782	$	17,452	$	9,256

(a)Includes dividend paid deduction of $107,137, $106,129 and $85,087 for the tax years ended December 31, 2023, 2022 and 2021, respectively.

(b)For the years ended December 31, 2023, 2022 and 2021, a non-cash valuation allowance of $875, ($14,984) and ($1,564), respectively, was recorded to income tax expense due to our limited ability to utilize Puerto Rico and Canada deferred tax assets in future years.

(c)    Management does not assert that the undistributed earnings of our Canadian subsidiaries will be permanently reinvested. For the years ended December 31, 2023, 2022 and 2021, we recognized a deferred tax (benefit) expense of ($95), ($84) and $292, respectively, for future foreign withholding taxes related to undistributed earnings.

(d)    Under Section 1031.01(b)(10) of the 2011 Puerto Rico Code, net operating losses and the tax basis of any other assets shall be reduced for forgiveness of debt to the extent by which the taxpayer is insolvent. As a result, a non-cash expense of $15,201 was recorded to income tax expense for the reduction of Puerto Rico deferred tax assets for the year ended December 31, 2022. The Puerto Rico income tax withholding rate applicable on the accrued interest of the debt is 29%. As a result, a cash expense of $5,068 was recorded to income tax expense.

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	2023		2022
Deferred tax assets:
Allowance for doubtful accounts	$	211	$	423
Net operating loss carry forwards	5,261		5,068
Tax credit carry forwards	1,202		1,364
Charitable contributions carry forward	2		1
Gross deferred tax assets	6,676		6,856
Less: valuation allowance	(5,333)		(4,435)
Net deferred tax assets	1,343		2,421
Deferred tax liabilities:
Intangibles	(4,926)		(5,016)
Accrued liabilities not deducted for tax purposes	(2,133)		(2,222)
Investment in partnerships	(2,611)		(1,758)
Property, plant and equipment	(2,956)		(2,234)
Undistributed earnings of foreign subsidiaries	(764)		(842)
Gross deferred tax liabilities	(13,390)		(12,072)
Net deferred tax liabilities	$	(12,047)	$	(9,651)

As of December 31, 2023, we have approximately $45,589 of U.S. net operating loss carry forwards to offset future taxable income. Of this amount, $12,399 is subject to Internal Revenue Code §382 limitation but will be available to be fully utilized by no later than 2027. These carry forwards expire between 2030 through 2037. In addition, we have $1,205 of various credits available to offset future U.S. federal income tax.

As of December 31, 2023, we have approximately $1,313,978 of state net operating loss carry forwards before valuation allowances. These state net operating losses are available to reduce future taxable income and expire at various times and amounts. In addition, we have $64 of various credits available to offset future state income tax. There was no valuation allowance related to state net operating losses as of December 31, 2023 and 2022. There was no net change in the total state valuation allowance for the year ended December 31, 2023 and a net decrease in the total state valuation allowance of $334 for the year ended December 31, 2022.

As of December 31, 2023, we had approximately $4,512 of Canadian net operating loss carry forwards before valuation allowances. These Canadian net operating losses are available to offset future taxable income. These carry forwards expire between 2040 and 2043.

As of December 31, 2023, we had approximately $9,092 of Puerto Rico net operating loss carry forwards before valuation allowances. These Puerto Rico net operating losses are available to offset future taxable income. These carry forwards expire in 2032 and 2033. In addition, we have $688 of alternative minimum tax credits available to offset future Puerto Rico income tax.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the carry forwards governed by the tax code. Based on the current level of pretax earnings, the Company will not generate the minimum amount of future taxable income to support the realization of the deferred tax assets. As a result, management has determined that a valuation allowance related to Puerto Rico and Canada net operating loss carry forwards and other deferred tax assets is necessary. The valuation allowance for these deferred tax assets as of December 31, 2023 and 2022 was $5,333 and $4,435, respectively. The net change in the total valuation allowance for the years ended December 31, 2023 and 2022 was an increase (decrease) of $898 and ($14,664), respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted in the near term if estimates of future taxable income during the carry forward period increase.

As of December 31, 2023, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $15,277. Management does not designate these earnings as permanently reinvested and has recognized a deferred tax liability of approximately $764 related to foreign withholding taxes on these earnings. We have recognized a current year tax benefit of $95 related to 2023 earnings.

Under ASC 740, Income Taxes, we provide for uncertain tax positions, and the related interest, and adjust recognized tax benefits and accrued interest accordingly. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance as of December 31, 2021	$	5,125
Additions for tax positions related to current year	718
Additions for tax positions related to prior years	1,142
Lapse of statute of limitations	(1,441)
Balance as of December 31, 2022	$	5,544
Additions for tax positions related to prior years	703
Lapse of statute of limitations	(1,815)
Balance as of December 31, 2023	$	4,432

Included in the balance of unrecognized benefits at December 31, 2023 is $4,432 of tax benefits that, if recognized in future periods, would impact our effective tax rate. During the years ended December 31, 2023 and 2022, we recognized interest and penalties of $76 and $212, respectively, as a component of income tax expense in connection with our liabilities related to uncertain tax positions.

Within the next twelve months, we expect to decrease our unrecognized tax benefits by approximately $1,314 as a result of the expiration of statute of limitations.

We are subject to income taxes in the U.S. and nearly all states. In addition, the Company is subject to income taxes in Canada and the Commonwealth of Puerto Rico. We are no longer subject to U.S federal income tax examinations by tax authorities for years prior to 2020, or for any U.S. state income tax audit prior to 2017. With respect to Canada and Puerto Rico, we are no longer subject to income tax audits for years before 2020 and 2019, respectively.