Note 21 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

21.  Income Taxes:

The Company elected to qualify as a REIT in accordance with the Code commencing with its taxable year which began January 1, 1992. To qualify as a REIT, the Company must meet several organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted REIT taxable income to its stockholders. Management intends to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income. If the Company failed to qualify as a REIT in any taxable year, it would be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be permitted to elect REIT status for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. The Company is also subject to local taxes on certain Non-U.S. investments.

Reconciliation between GAAP Net Income and Federal Taxable Income:

The following table reconciles GAAP net income to taxable income for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	2014 (Estimated)			2013 (Actual)			2012 (Actual)
GAAP net income attributable to the Company	$	424,001		$	236,281		$	266,073
Less: GAAP net income of taxable REIT subsidiaries		(13,110	)		(5,950	)		(5,249	)
GAAP net income from REIT operations (a)		410,891			230,331			260,824
Net book depreciation in excess of tax depreciation		39,620			32,906			37,492
Capitalized leasing/legal commissions		(13,576	)		-			(12,986	)
Deferred/prepaid/above and below market rents, net		(20,487	)		(11,985	)		(16,050	)
Fair market value debt amortization		(7,419	)		(3,510	)		(2,977	)
Accounts receivable reserve		(681	)		(3,047	)		(741	)
Restricted stock		(1,078	)		(2,247	)		(200	)
Book/tax differences from non-qualified stock options		(5,144	)		(255	)		1,774
Book/tax differences from investments in real estate joint ventures		33,268			(11,928	)		60,441
Book/tax difference on sale of property		(152,613	)		36,896			(77,853	)
Foreign income tax from Mexico capital gains		(17,387	)		(31,130	)		-
Cumulative foreign currency translation adjustment & deferred tax adjustment		145,608			5,095			-
Book adjustment to property carrying values and marketable equity securities		93,956			22,811			2,656
Taxable currency exchange (loss)/gain, net		(73,138	)		(25,958	)		(2,620	)
Book/tax differences on capitalized costs		5,498			4,607			5,781
Repair regulation deduction		(95,033	)		-			-
Dividends from taxable REIT subsidiaries		66,745			2,980			2,304
GAAP change in control gain		(107,235	)		9,147			(15,555	)
Other book/tax differences, net		(1,052	)		(4,822	)		502
Adjusted REIT taxable income	$	300,743		$	249,891		$	242,792

Certain amounts in the prior periods have been reclassified to conform to the current year presentation, in the table above.

(a)  All adjustments to "GAAP net income from REIT operations" are net of amounts attributable to noncontrolling interest and taxable REIT subsidiaries.

Cash Dividends Paid and Dividends Paid Deductions (in thousands):

For the years ended December 31, 2014, 2013 and 2012 cash dividends paid exceeded the dividends paid deduction and amounted to $427,873, $400,354, and $382,722, respectively.

Characterization of Distributions:

The following characterizes distributions paid for the years ended December 31, 2014, 2013 and 2012, (in thousands):

	2014				2013				2012
Preferred F Dividends
Ordinary income	$	-	-	%	$	-	-	%	$	9,116	94	%
Capital gain		-	-	%		-	-	%		582	6	%
	$	-	-	%	$	-	-	%	$	9,698	100	%
Preferred G Dividends
Ordinary income	$	-	-	%	$	-	-	%	$	33,046	94	%
Capital gain		-	-	%		-	-	%		2,109	6	%
	$	-	-	%	$	-	-	%	$	35,155	100	%
Preferred H Dividends
Ordinary income	$	6,762	56	%	$	8,694	72	%	$	11,351	94	%
Capital gain		5,313	44	%		3,381	28	%		725	6	%
	$	12,075	100	%	$	12,075	100	%	$	12,076	100	%
Preferred I Dividends
Ordinary income	$	13,440	56	%	$	17,280	72	%	$	12,847	94	%
Capital gain		10,560	44	%		6,720	28	%		820	6	%
	$	24,000	100	%	$	24,000	100	%	$	13,667	100	%
Preferred J Dividends
Ordinary income	$	6,930	56	%	$	8,910	72	%	$	2,585	94	%
Capital gain		5,445	44	%		3,465	28	%		165	6	%
	$	12,375	100	%	$	12,375	100	%	$	2,750	100	%
Preferred K Dividends
Ordinary income	$	5,513	56	%	$	6,064	72	%	$	-	-	%
Capital gain		4,331	44	%		2,358	28	%		-	-	%
	$	9,844	100	%	$	8,422	100	%	$	-	-	%
Common Dividends
Ordinary income	$	133,048	36	%	$	158,001	46	%	$	222,751	72	%
Capital Gain		103,483	28	%		61,827	18	%		15,469	5	%
Return of capital		133,048	36	%		123,654	36	%		71,156	23	%
	$	369,579	100	%	$	343,482	100	%	$	309,376	100	%
Total dividends distributed	$	427,873			$	400,354			$	382,722

Taxable REIT Subsidiaries (“TRS”) and Taxable Entities:

The Company is subject to federal, state and local income taxes on income reported through its TRS activities, which include wholly owned subsidiaries of the Company. The Company’s TRS consists of Kimco Realty Services ("KRS"), which due to a merger on April 1, 2013 includes FNC Realty Corporation (“FNC”), and the consolidated entity, Blue Ridge Real Estate Company/Big Boulder Corporation.  On April 2, 2013, the Company contributed its interest in FNC to KRS and KRS acquired all of the outstanding stock of FNC in a reverse cash merger. The Company is also subject to local non-U.S. taxes on certain investments located outside the U.S. 

The Company is subject to taxes on its activities in Canada, Mexico, and Chile. In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada and Mexico generally are not subject to withholding tax. The Company does not anticipate the need to repatriate foreign funds from Chile to provide for its cash flow needs in the U.S. and, as such, no significant withholding or transaction taxes are expected in the foreseeable future. The Company will be subject to withholding taxes in Chile on the distribution of any proceeds from sale transactions. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S. These investments are held by the Company at the REIT level and not in the Company’s U.S. taxable REIT subsidiaries. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.

Income taxes have been provided for on the asset and liability method as required by the FASB’s Income Tax guidance. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and the tax basis of taxable assets and liabilities.

The Company’s pre-tax book income/(loss) and (provision)/benefit for income taxes relating to the Company’s TRS and taxable entities which have been consolidated for accounting reporting purposes, for the years ended December 31, 2014, 2013, and 2012, are summarized as follows (in thousands):

	2014			2013			2012
Income/(loss) before income taxes – U.S.	$	22,176		$	(4,849	)	$	8,390
(Provision)/benefit for income taxes, net:
Federal :
Current		(522	)		(1,647	)		(503	)
Deferred		(7,156	)		9,725			(535	)
Federal tax (provision)/benefit		(7,678	)		8,078			(1,038	)
State and local:
Current		(165	)		1,159			(1,543	)
Deferred		(1,223	)		1,562			(560	)
State tax (provision)/benefit		(1,388	)		2,721			(2,103	)
Total tax (provision)/benefit – U.S.		(9,066	)		10,799			(3,141	)
Net income from U.S. taxable REIT subsidiaries	$	13,110		$	5,950		$	5,249
Income before taxes – Non-U.S.	$	116,184		$	188,215		$	33,842
(Provision)/benefit for Non-U.S. income taxes:
Current	$	(18,131	)	$	(30,102	)	$	5,790
Deferred		(6,749	)		2,045			1,239
Non-U.S. tax (provision)/benefit	$	(24,880	)	$	(28,057	)	$	7,029

The Company’s deferred tax assets and liabilities at December 31, 2014 and 2013, were as follows (in thousands):

	2014			2013
Deferred tax assets:
Tax/GAAP basis differences	$	68,702		$	50,133
Net operating losses		51,142			72,716
Related party deferred losses		3,843			6,214
Tax credit carryforwards		3,899			3,773
Capital loss carryforwards		3,995			3,867
Charitable contribution carryforwards		11			-
Non-U.S. tax/GAAP basis differences		10,566			50,920
Valuation allowance – U.S.		(25,045	)		(25,045	)
Valuation allowance – Non-U.S.		(9,257	)		(38,667	)
Total deferred tax assets		107,856			123,911
Deferred tax liabilities – U.S.		(25,503	)		(21,302	)
Deferred tax liabilities – Non-U.S.		(6,812	)		(11,367	)
Net deferred tax assets	$	75,541		$	91,242

As of December 31, 2014, the Company had net deferred tax assets of $75.5 million comprised of (i) $43.2 million relating to the difference between the basis of accounting for federal and state income tax reporting and GAAP reporting for real estate assets, joint ventures, and other investments, net of $25.5 million of deferred tax liabilities, (ii) $19.8 million and $6.3 million for the tax effect of net operating loss carryovers within KRS and FNC, respectively, net of a valuation allowance within FNC of $25.0 million, (iii) $3.8 million for losses deferred for federal and state income tax purposes for transactions with related parties, (iv) $3.9 million for tax credit carryovers, (v) $4.0 million for capital loss carryovers, and (vi) $1.3 million of deferred tax assets related to its investments in Canada and Latin America, net of a valuation allowance of $9.3 million and deferred tax liabilities of $6.8 million. General business tax credit carryovers of $1.5 million within KRS expire during taxable years from 2027 through 2033, and alternative minimum tax credit carryovers of $2.4 million do not expire.

The major differences between GAAP basis of accounting and the basis of accounting used for federal and state income tax reporting consist of impairment charges recorded for GAAP, but not recognized for tax purposes, depreciation and amortization, rental revenue recognized on the straight line method for GAAP, reserves for doubtful accounts, and the period in which certain gains were recognized for tax purposes, but not yet recognized under GAAP. The Company had foreign net deferred tax liabilities of $5.5 million, related to its operations in Canada and Latin America, which consists primarily of differences between the GAAP book basis and the basis of accounting applicable to the jurisdictions in which the Company is subject to tax.

Deferred tax assets and deferred tax liabilities are included in the caption Other assets and Other liabilities on the accompanying Consolidated Balance Sheets at December 31, 2014 and 2013. Operating losses and the valuation allowance are related primarily to the Company’s consolidation of its taxable REIT subsidiaries for accounting and reporting purposes. For the year ended December 31, 2014, KRS produced $27.4 million of taxable income and utilized $27.4 million of its $72.8 million net operating loss carryovers. For the year ended December 31, 2013, KRS produced $64.3 million of net operating loss carryovers which expire in 2033 and $10.0 million of capital loss carryforwards that expire in 2018. At December 31, 2014 and 2013, FNC had $94.4 million and $108.4 million, respectively, of net operating loss carryovers which expire from 2021 through 2024.

During 2013, the Company determined that a reduction of $8.7 million of the valuation allowance against FNC’s deferred tax assets was deemed appropriate based on expected future taxable income. The Company maintained a valuation allowance of $25.0 million within FNC to reduce the deferred tax asset of $42.5 million related to net operating loss carryovers to the amount the Company determined is more likely than not realizable. The Company analyzed projected taxable income and the expected utilization of FNC’s remaining net operating loss carryovers and determined a partial valuation allowance was appropriate.

The Company’s investments in Latin America are made through individual entities which are subject to local taxes. The Company assesses each entity to determine if deferred tax assets are more likely than not realizable. This assessment primarily includes an analysis of cumulative earnings and the determination of future earnings to the extent necessary to fully realize the individual deferred tax asset. Based on this analysis the Company has determined that a full valuation allowance is required for entities which have a three-year cumulative book loss and for which future earnings are not readily determinable. In addition, the Company has determined that no valuation allowance is needed for entities that have three-years of cumulative book income and future earnings are anticipated to be sufficient to more likely than not realize their deferred tax assets. At December 31, 2014, the Company had total deferred tax assets of $9.5 million relating to its Latin American investments with an aggregate valuation allowance of $9.3 million.

The Company’s deferred tax assets in Canada result principally from depreciation deducted under GAAP that exceed capital cost allowances claimed under Canadian tax rules. The deferred tax asset will naturally reverse upon disposition as tax basis will be greater than the basis of the assets under generally accepted accounting principles.

As of December 31, 2014, the Company determined that no valuation allowance was needed against a $65.5 million net deferred tax asset within KRS. The Company based its determination on an analysis of both positive evidence and negative evidence using its judgment as to the relative weight of each. The Company believes, when evaluating KRS’s deferred tax assets, special consideration should be given to the unique relationship between the Company as a REIT and KRS as a taxable REIT subsidiary. This relationship exists primarily to protect the REIT’s qualification under the Code by permitting, within certain limits, the REIT to engage in certain business activities in which the REIT cannot directly participate. As such, the REIT controls which and when investments are held in, or distributed or sold from, KRS. This relationship distinguishes a REIT and taxable REIT subsidiary from an enterprise that operates as a single, consolidated corporate taxpayer. The Company will continue through this structure to operate certain business activities in KRS.

The Company’s analysis of KRS’s ability to utilize its deferred tax assets includes an estimate of future projected income. To determine future projected income, the Company scheduled KRS’s pre-tax book income and taxable income over a twenty year period taking into account its continuing operations (“Core Earnings”). Core Earnings consist of estimated net operating income for properties currently in service and generating rental income. Major lease turnover is not expected in these properties as these properties were generally constructed and leased within the past seven years. The Company can employ strategies to realize KRS’s deferred tax assets including transferring its property management business or selling certain built-in gain assets.

The Company’s projection of KRS’s future taxable income over twenty years, utilizing the assumptions above with respect to Core Earnings, net of related expenses, generates sufficient taxable income to absorb a reversal of the Company’s deductible temporary differences, including net operating loss carryovers. Based on this analysis, the Company concluded it is more likely than not that KRS’s net deferred tax asset of $65.5 million (excluding net deferred tax assets of FNC discussed above) will be realized and therefore, no valuation allowance is needed at December 31, 2014. If future income projections do not occur as forecasted or the Company incurs additional impairment losses in excess of the amount Core Earnings can absorb, the Company will reconsider the need for a valuation allowance.

Provision/(benefit) differ from the amounts computed by applying the statutory federal income tax rate to taxable income before income taxes as follows (in thousands):

	2014		2013			2012
Federal provision/(benefit) at statutory tax rate (35%)	$	7,762	$	(1,697	)	$	2,936
State and local provision/(benefit), net of federal benefit		1,304		(205	)		230
Acquisition of FNC		-		(9,126	)		-
Other		-		229			(25	)
Total tax provision/(benefit) – U.S.	$	9,066	$	(10,799	)	$	3,141

Uncertain Tax Positions:

The Company is subject to income tax in certain jurisdictions outside the U.S., principally Canada and Mexico.  The statute of limitations on assessment of tax varies from three to seven years depending on the jurisdiction and tax issue. Tax returns filed in each jurisdiction are subject to examination by local tax authorities.  The Company is currently under audit by the Canadian Revenue Agency, Mexican Tax Authority and the U.S. Internal Revenue Service (“IRS”).  In October 2011, the IRS issued a notice of proposed adjustment, which proposes pursuant to Section 482 of the Code, to disallow a capital loss claimed by KRS on the disposition of common shares of Valad Property Ltd., an Australian publicly listed company.  Because the adjustment is being made pursuant to Section 482 of the Code, the IRS believes it can assert a 100 percent “penalty” tax pursuant to Section 857(b)(7) of the Code and disallow the capital loss deduction. The notice of proposed adjustment indicates the IRS’ intention to impose the 100 percent “penalty” tax on the Company in the amount of $40.9 million and disallowing the capital loss claimed by KRS.  The Company and its outside counsel have considered the IRS' assessment and believe that there is sufficient documentation establishing a valid business purpose for the transfer, including recent case history showing support for similar positions. Accordingly, the Company strongly disagrees with the IRS’ position on the application of Section 482 of the Code to the disposition of the shares, the imposition of the 100 percent penalty tax and the simultaneous assertion of the penalty tax and disallowance of the capital loss deduction. The Company received a Notice of Proposed Assessment and filed a written protest and requested an IRS Appeals Office conference. An appeals hearing was attended by Management and its attorneys, the IRS Compliance Group and an IRS Appeals Officer in November, 2014, at which time IRS Compliance presented arguments in support of their position, as noted herein. Management and its attorneys presented rebuttal arguments in support of its position. The matter is currently under consideration by the Appeals Officer.  The Company intends to vigorously defend its position in this matter and believes it will prevail.

Resolutions of these audits are not expected to have a material effect on the Company’s financial statements. During 2013, the Company early adopted ASU 2013-11 prospectively and reclassified a portion of its reserve for uncertain tax positions. The reserve for uncertain tax positions included amounts related to the Company’s Canadian operations. The Company has unrecognized tax benefits reported as deferred tax assets and are available to settle adjustments made with respect to the Company’s uncertain tax positions in Canada. The Company reduced its reserve for uncertain tax positions by $12.3 million associated with its Canadian operations and reduced its deferred tax assets in accordance with ASU 2013-11. The Company does not believe that the total amount of unrecognized tax benefits as of December 31, 2014, will significantly increase or decrease within the next 12 months. As of December 31, 2014, the Company’s Canadian uncertain tax positions, which reduce its deferred tax assets, aggregated $10.4 million.

The liability for uncertain tax benefits principally consists of estimated foreign, federal and state income tax liabilities in years for which the statute of limitations is open. Open years range from 2008 through 2014 and vary by jurisdiction and issue. The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2014 and 2013 were as follows (in thousands):

	2014		2013
Balance, beginning of year	$	4,590	$	16,890
Increases for tax positions related to current year		59		15
Reduction due to adoption of ASU 2013-11(a)		-		(12,315	)
Balance, end of year	$	4,649	$	4,590

(a) This amount was reclassified against the related deferred tax asset relating to the Company’s early adoption of ASU 2013-11 as discussed above.