Income Taxes

6 Months Ended

Jun. 30, 2020

For the three and six months ended June 30, 2020 and 2019, the Company qualified to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes at least 100% of its taxable income to stockholders and does not engage in prohibited transactions. Certain activities the Company performs may produce income that will not be qualifying income for REIT purposes. The Company has designated its TRSs to engage in these activities. The tables below reflect the taxes accrued at the TRS level and the tax attributes included in the consolidated financial statements.

The income tax provision for the three and six months ended June 30, 2020 and 2019, respectively, is comprised of the following components (dollar amounts in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Current income tax expense	$	2,033		$	15		$	2,043		$	8
Deferred income tax benefit	(106		)	(149		)	(355		)	(68		)
Total provision (benefit)	$	1,927		$	(134	)	$	1,688		$	(60	)

Deferred Tax Assets and Liabilities

The major sources of temporary differences included in the deferred tax assets and their deferred tax effect as of June 30, 2020 and December 31, 2019 are as follows (dollar amounts in thousands):



	June 30, 2020			December 31, 2019
Deferred tax assets
Net operating loss carryforward	$	4,582		$	3,975
Capital loss carryover	4,418			739
GAAP/Tax basis differences	3,841			3,699
Total deferred tax assets ⁽¹⁾	12,841			8,413
Deferred tax liabilities
Deferred tax liabilities	4			5
Total deferred tax liabilities ⁽²⁾	4			5
Valuation allowance ⁽¹⁾	(11,102		)	(7,029		)
Total net deferred tax asset	$	1,735		$	1,379


⁽¹⁾	Included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽²⁾	Included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

As of June 30, 2020, the Company, through wholly-owned TRSs, had incurred net operating losses in the aggregate amount of approximately $11.7 million. The Company’s carryforward net operating losses of approximately $10.8 million can be carried forward indefinitely until they are offset by future taxable income. The remaining $0.9 million of net operating losses will expire between 2036 and 2037 if they are not offset by future taxable income. Additionally, as of June 30, 2020, the Company, through its wholly-owned TRSs, had also incurred approximately $13.0 million in capital losses. The Company's carryforward capital losses will expire between 2023 and 2024 if they are not offset by future capital gains.

At June 30, 2020, the Company has recorded a valuation allowance against certain deferred tax assets as management does not believe that it is more likely than not that these deferred tax assets will be realized. The change in the valuation for the current year is approximately $4.1 million. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided.

The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company's federal, state and city income tax returns are subject to examination by the Internal Revenue Service and related tax authorities generally for three years after they were filed. The Company has assessed its tax positions for all open years and concluded that there are no material uncertainties to be recognized.

Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. To the extent that the Company incurs interest and accrued penalties in connection with its tax obligations, including expenses related to the Company’s evaluation of unrecognized tax positions, such amounts will be included in income tax expense.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in the U.S. This legislation was intended to support the economy during the COVID-19 pandemic with temporary changes to income and non-income based tax laws. For the three and six months ended June 30, 2020, the changes are not expected to have a material impact to our financial statements. We will continue to monitor as additional guidance is issued by the U.S. Treasury Department, the Internal Revenue Service and others.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References+ Details