INCOME TAXES

12 Months Ended

Dec. 31, 2020

The income tax expense was composed as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Current:
Federal	$	(3)	$	3	$	—
Current state and local	250		262		262
Total current	247		265		262
Deferred:
Federal deferred	—		—		—
State deferred	—		—		—
Total deferred	—		—		—
Total Income Tax Expense	$	247	$	265	$	262

The following table is a reconciliation of the U.S. statutory income tax rate to the effective income tax rate included in the accompanying Consolidated Income Statements:


	Year Ended December 31,
	2020		2019		2018
U.S. statutory rate	21.0	%	21.0	%	21.0	%
Current benefit	(21.2)		(21.0)		(21.0)
State and local income taxes, net of federal tax benefits	0.3		0.8		0.7
Benefit of federal income tax credits	—		—		—
Valuation allowance	0.2		—		—
Permanent differences	—		—		—
Effective Income Tax Rate	0.3	%	0.8	%	0.7	%

In December 2017, the Tax Cuts and Jobs Act lowered the federal corporate income tax rate to 21% effective for taxable years after December 31, 2017. Due to FCPT’s REIT status, we did not recognize a significant impact to our reported results resulting from this change.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes, as well as operating loss and tax credit carryforwards. The Company evaluates the realizability of its deferred tax assets and recognizes a valuation allowance if, based on the available evidence, both positive and negative, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers, among other matters, estimates of expected future taxable income, nature of current and cumulative losses, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Based on an assessment of all factors, including historical losses of the Kerrow Restaurants Operating Business, it was determined that full valuation allowances were required on the net deferred tax assets as of December 31, 2020. Changes in estimates of deferred tax asset realizability are included in Income tax expense in the Consolidated Income Statements.

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:


	December 31,
(In thousands)	2020		2019		2018
Compensation and employee benefits	$	32	$	40	$	37
Charitable contribution and credit carryforwards	816		636		484
Net operating losses	145		—		—
Lease payable	133		139		148
UNICAP	12		13		12
Gross deferred tax assets	1,138		828		681
Prepaid expenses	(28)		(25)		(24)
Straight-line rent	—		—		—
Buildings and equipment (1)	(285)		(275)		(284)
Gross deferred tax liabilities	(313)		(300)		(308)
Valuation allowance	(825)		(528)		(373)
Net Deferred Tax Assets (Liabilities)	$	—	$	—	$	—

(1) These buildings and equipment in 2020, 2019 and 2018 relate to the Kerrow Restaurant Operating Business.

- 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.

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