INCOME TAXES

12 Months Ended

Dec. 31, 2020

Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. Through the Mergers, Rayonier transferred all of its assets to the Operating Partnership on May 8, 2020. See Note 1 - Summary of Significant Accounting Policies for more information. As a result, Rayonier owns a 96.9% interest in the Operating Partnership and conducts substantially all of its timberland operations through the Operating Partnership. The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return. Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through our TRS. The TRS subsidiaries are subject to United States federal and state corporate income tax. The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and is treated as a partnership for U.S. income tax purposes.

PROVISION FOR INCOME TAXES FROM CONTINUING OPERATIONS

The provision for income taxes for each of the three years ended December 31 follows:


	2020	2019	2018
Current
U.S. federal	($237)	$2	$2
State	(339)	(122)	37
Foreign	(5,391)	(1,542)	(1,914)
	(5,967)	(1,662)	(1,875)
Deferred
U.S. federal	8,355	465	3,803
State	325	17	146
Foreign	(3,027)	(11,278)	(23,360)
	5,653	(10,796)	(19,411)
Changes in valuation allowance	(6,695)	(482)	(3,950)
Total	($7,009)	($12,940)	($25,236)

A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate for each of the three years ended December 31 follows:


	2020			2019			2018
U.S. federal statutory income tax rate	($7,726)	(21.0)	%	($16,930)	(21.0)	%	($29,939)	(21.0)	%
U.S. and foreign REIT income	16,569	45.0		19,902	24.7		32,949	23.1
Matariki Group and Rayonier New Zealand Ltd	(7,698)	(20.8)		(11,181)	(13.9)		(23,166)	(16.2)

Change in valuation allowance	(6,695)	(18.2)		(482)	(0.6)		(3,950)	(2.8)
State Net Operating Loss	1,118	3.0		—	—		—	—
Prepaid land sales	(1,084)	(2.9)		—	—		—	—




Internal transfer of assets deferred	—	—		(1,815)	(2.3)		—	—

Foreign income tax withholding	(721)	(2.0)		(1,535)	(1.9)		(1,848)	(1.3)
Other	(772)	(2.1)		(899)	(1.1)		718	0.5
Income tax expense as reported for net income	($7,009)	(19.0)	%	($12,940)	(16.1)	%	($25,236)	(17.7)	%

The Company’s effective tax rate is below the 21 percent U.S. statutory rate primarily due to tax benefits associated with being a REIT.

DEFERRED TAXES

Deferred income taxes result from differences between the timing of recognizing revenues and expenses for financial book purposes versus income tax purposes. The nature of the temporary differences and the resulting net deferred tax asset/liability for the two years ended December 31 follows:


	2020	2019
Gross deferred tax assets:
Pension, postretirement and other employee benefits	$1,403	$1,512
New Zealand subsidiary	23,461	23,211
CBPC tax credit carry forwards	14,555	14,555
Capitalized real estate costs	1,459	6,635
U.S. TRS net operating loss	18,363	5,410
Land basis difference	9,468	10,626
Other	5,502	4,356
Total gross deferred tax assets	74,211	66,305
Less: Valuation allowance	(46,015)	(39,320)
Total deferred tax assets after valuation allowance	$28,196	$26,985
Gross deferred tax liabilities:
Accelerated depreciation	(38)	(23)

New Zealand subsidiary	(98,245)	(87,548)


Other	(4,884)	(3,938)
Total gross deferred tax liabilities	(103,167)	(91,509)
Net deferred tax liability reported as noncurrent	($74,971)	($64,524)

Net operating loss (“NOL”) and tax credit carryforwards as of the two years ended December 31 follows:


	Tax Effected Balance	Expiration
2020

U.S. Federal NOL Carryforwards- Pre TCJA (a)	$2,363	2036
U.S. Federal NOL Carryforwards- Post TCJA (a)	13,017	None
U.S State NOL Carryforwards (b)	2,983	2031
Cellulosic Biofuel Producer Credit (c)	14,555	2023


2019
New Zealand subsidiary NOL carryforwards	$3,262	None
U.S. Federal NOL Carryforwards- Pre TCJA (a)	2,363	2036
U.S. Federal NOL Carryforwards- Post TCJA (a)	1,872	None
U.S State NOL Carryforwards (b)	1,175	2031
Cellulosic Biofuel Producer Credit (c)	14,555	2023

(a)The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017. The TCJA lifted the 20-year federal NOL Carryforward period. Net operating losses generated after 12/31/2017 have an indefinite carryforward period.

(b)The U.S. state NOL is made up of several jurisdictions that expire in various future years. No State NOL is set to expire before 12/31/2031.

(c)The Further Consolidated Appropriations Act, 2020 was signed into law on December 20, 2019. The Further Consolidated Appropriations Act, 2020 included the Taxpayer Certainty and Disaster Relief Act of 2019 (Tax Extenders Act), which temporarily renewed approximately two dozen credits that previously expired or were set to expire at the end of 2019. The Cellulosic Biofuel Producer Credit was one of the credits extended under this act.

Valuation allowances are provided when it is considered more likely than not that the deferred tax assets will not be recorded. Since 2015, we have had a 100% valuation allowance against the U.S. taxable REIT subsidiary's deferred tax assets, net of deferred tax liabilities. During 2020, the net deferred tax assets increased by $6.7 million, and thus the valuation allowance was adjusted accordingly. We recorded a change in the valuation allowance of $6.7 million related to the U.S. TRS's deferred tax assets, net of liabilities.

TAX STATUTES

The following table provides detail of the tax years that remain open to examination by the IRS and other significant taxing jurisdictions:


Taxing Jurisdiction			Open Tax Years
U.S. Internal Revenue Service			2017 - 2019
New Zealand Inland Revenue			2015 - 2019

TAX CHARACTERISTICS OF DIVIDEND DISTRIBUTIONS

The taxable nature of the dividend distributions paid for each of the three years ended December 31 follows:


	2020		2019		2018
Total dividends/distributions paid per common share/unit	$1.08		$1.08		$1.06
Tax characteristics:
Capital gain	100	%	100	%	100	%

- 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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