INCOME TAXES

Beginning with our inception in 1991, we have elected to be taxed as a REIT under the Internal Revenue Code (the “Code”). We elected that our subsidiary established on September 30, 2012 in connection with the Bickford arrangement (which previously held our ownership interest in an operating company) be taxed as a TRS under provisions of the Code. The TRS is subject to federal and state income taxes like those applicable to regular corporations. As discussed in Note 2, we terminated our participation in the joint venture resident in our TRS on September 30, 2016. Aside from such income taxes which have been applicable to any taxable income in the TRS, we will not be subject to federal income tax provided that we continue to qualify as a REIT and make distributions to stockholders equal to or in excess of 90% of our taxable income.

Per share dividend payments to common stockholders for the last three years are characterized for tax purposes as follows:



(Unaudited)	2017		2016		2015
Ordinary income	$	2.93054	$	2.67863	$	2.62808
Capital gain	0.20643		0.92137		0.69110
Return of capital	0.66303		—		0.08082
Dividends paid per common share	$	3.80	$	3.60	$	3.40

Our consolidated provision for state and federal income tax expense (benefit) for the years ended 2017, 2016, and 2015 was $124,000, $854,000, and $(583,000), respectively. In 2016, we ended the RIDEA joint venture held by our TRS that gave rise to state and federal income tax expense of $749,000 in 2016 and a tax benefit of $707,000 in 2015. The entire tax benefit from 2015 and an equal and offsetting expense amount in 2016 was from deferred tax expense from temporary differences related to the assets held in our joint venture, primarily net operating losses. The remaining $42,000 of tax expense in 2016 was current state and federal income tax from the unwinding of our RIDEA joint venture. At the conclusion of 2016, we still maintained a deferred tax asset of approximately $433,000, all of which had been fully reserved through a valuation allowance. During 2017, as a result of the enactment of a new statutory federal income tax rate, that tax asset has been revalued at $334,000, all of which is still fully reserved.

We have recorded state income tax expense of $124,000, $105,000 and $124,000 or the years ended December 31, 2017, 2016, and 2015, respectively, related to a franchise tax levied by the state of Texas that has attributes of an income tax. Our state income taxes described above are combined in franchise, excise and other taxes in our Consolidated Statements of Income. Income taxes related to the equity interest in the unconsolidated operating company whose interest is owned by our TRS are included in our Consolidated Statements of Income under the caption Income tax benefit (expense) of taxable REIT subsidiary.

We made state income tax payments of $170,000, $30,000,and $122,000 for the years ended December 31, 2017, 2016, and 2015, respectively.