Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

7. INCOME TAXES

CREC is a taxable entity and its consolidated provision (benefit) for income taxes from operations for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):

		September 30,		September 30,		September 30,
	2011		2010		2009
Current tax benefit (provision):
Federal	$	—	$	720	$	4,605
State		186		359		(49	)
		186		1,079		4,556
Deferred tax benefit (provision):
Federal		—		—		(7,984	)
State		—		—		(913	)
		—		—		(8,897	)
Benefit (provision) for income taxes from operations	$	186	$	1,079	$	(4,341	)

The net income tax benefit (provision) differs from the amount computed by applying the statutory federal income tax rate to CREC’s income before taxes for the years ended December 31, 2011, 2010 and 2009 as follows ($ in thousands):

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	2011						2010						2009
	Amount			Rate			Amount			Rate			Amount			Rate
Federal income tax benefit	$	35,112			35	%	$	1,832			35	%	$	39,175			35	%
State income tax benefit, net of federal income tax effect		121			0	%		141			3	%		3,625			4	%
Valuation allowance		(34,191	)		(34	)%		(894	)		(17	)%		(47,141	)		(43	)%
Other		(856	)		(1	)%		—			—			—			—
Benefit (provision) applicable to income (loss) from continuing operations	$	186			0	%	$	1,079			21	%	$	(4,341	)		(4	)%

The tax effect of significant temporary differences representing CREC’s deferred tax assets and liabilities as of December 31, 2011 and 2010 are as follows (in thousands):

		September 30,			September 30,
	2011			2010
Income from unconsolidated joint ventures	$	26,009		$	5,519
Residential lots, land and outparcels		20,248			—
Long-term incentive equity awards		1,608			1,281
For-sale multi-family units basis differential		269			2,519
Interest carryforward		13,158			13,158
Federal and state tax carryforwards		23,883			25,464
Other		860			(5	)
Total deferred tax assets		86,035			47,936
Valuation allowance		(86,035	)		(47,936	)
Net deferred tax asset	$	—		$	—

A valuation allowance is required to be recorded against deferred tax assets if, based on the available evidence, it is more likely than not that such assets will not be realized. When assessing the need for a valuation allowance, appropriate consideration should be given to all positive and negative evidence related to this realization. This evidence includes, among other things, the existence of current and recent cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, the Company’s history with loss carryforwards and available tax planning strategies.

In 2011 and 2010, the deferred tax asset of the Company’s taxable REIT subsidiary, CREC, equaled $86.0 million and $47.9 million, respectively, with a valuation allowance placed against the full amount. The conclusion that a valuation allowance should be recorded was based on losses at CREC in current and recent years, and the inability of the Company to predict, with any degree of certainty, when CREC would generate income in the future in amounts sufficient to utilize the deferred tax asset. This uncertainty is the result of the continued decline in the housing market which directly impacts CREC’s residential land and lot business.

As of December 31, 2011, the Company’s federal and state combined net operating loss (“NOL”) carryforwards are $120.5 million. In 2011, $1.3 million of federal and state NOLs were utilized. The remainder of the net operating loss carryforwards will expire between 2022 and 2030, if unused. In addition, the Company has Alternative Minimum Tax (“AMT”) credit carryforwards of $72,000 which do not expire. On an after-tax basis, the Company’s federal and state NOL carryforwards and AMT credit carryforwards result in a deferred tax asset of $23.9 million.

The Company has interest carryforwards related to interest deductions of approximately $33.7 million as of both December 31, 2011 and 2010. The Company recorded deferred tax assets of $13.2 million as of both December 31, 2011 and 2010, reflecting the benefit of the interest carryforwards. Although such deferred tax assets do not expire, realization is dependent upon generating sufficient taxable income in the future.

As of December 31, 2010, the Company had income tax receivables of $500,000, which were refunded during 2011, related to the carryback of the 2009 loss in 2009 to open tax years in which the Company previously paid income taxes.