INCOME TAXES

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the filing of its 2015 tax return for its tax year ended December 31, 2015. With the exception of the Company’s taxable REIT subsidiary (“TRS”), to the extent the Company meets certain requirements under the Code, the Company will not be taxed on its federal taxable income. If we fail to qualify as a REIT for any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax, which, for corporations, was repealed under the Tax Cuts and Jobs Act (“TCJA”) for tax years beginning after December 31, 2017) and may not be able to qualify as a REIT for the four subsequent taxable years. In addition to its TRS, the Company is subject to certain foreign, and state and local income taxes, in particular income taxes arising from its operating activities in Puerto Rico, which are included in income tax expense on the consolidated statements of income and comprehensive income.

For U.S. federal income tax purposes, the Company and other minority members are partners in the Operating Partnership. As such, the partners are required to report their share of taxable income on their respective tax returns. However, during the nine months ended September 30, 2022 and 2021, certain non-real estate operating activities that could not be performed by the Company, occurred through the Company’s TRS, which is subject to federal, state and local income taxes. These income taxes are included in income tax expense on the consolidated statements of income and comprehensive income.

During the nine months ended September 30, 2022, the Company was subject to Puerto Rico corporate income taxes on its allocable share of Puerto Rico operating activities. The Puerto Rico corporate income tax consists of a flat 18.5% tax rate plus a graduated income surcharge tax for a maximum corporate income tax rate of 37.5%. In addition, the Company is subject to a 10% branch profits tax on the earnings and profits generated from its allocable share of Puerto Rico operating activities and such tax is included in income tax expense on the consolidated statements of income and comprehensive income.

For the three and nine months ended September 30, 2022, the Puerto Rico income tax expense was $0.6 million and $2.3 million, respectively, and $0.7 million and $1.4 million for the same periods in 2021. The REIT was not subject to any material state and local income tax expense or benefit for the three and nine months ended September 30, 2022. For the nine months ended September 30, 2021, the REIT’s state and local income tax benefit was $0.5 million. All amounts for the three and nine months ended September 30, 2022 and 2021 are included in income tax expense on the consolidated statements of income and comprehensive income.