Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

The Company elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distribute at least 90% of its taxable income to its shareholders.  It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status.  As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes to its shareholders.  As the Company distributed sufficient taxable income for each of the three years ended December 31, 2020, no U.S. federal income or excise taxes were incurred.  

If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four subsequent taxable years.  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain foreign, state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income.  In addition, the Company has a TRS that is subject to federal, state and local income taxes on any taxable income generated from its operational activity.  

In order to maintain its REIT status, the Company must meet certain income tests to ensure that its gross income consists of passive income and not income from the active conduct of a trade or business.  The Company utilizes its TRS to the extent certain fee and other miscellaneous non-real estate-related income cannot be earned by the REIT.  

For the years ended December 31, 2020, 2019 and 2018, the Company made a net payment of $0.7 million, $0.7 million and $1.1 million, respectively, related to taxes.  

In 2015, in accordance with temporary legislation of the Puerto Rico Internal Revenue Code, the Company made a voluntary election to prepay taxes related to the built-in gains associated with the real estate assets in Puerto Rico and restructured the ownership of its then 14 assets in Puerto Rico.  In 2018, the Company established a valuation allowance of $4.0 million on the then remaining prepaid tax asset triggered by the change in asset hold-period assumptions related to its change in strategic direction for the Puerto Rico properties.  In 2018, these assets were assumed by RVI and the associated valuation allowance was written off since this attribute couldn’t be transferred to RVI.  

The following represents the combined activity of the Company’s TRS (in thousands):

	For the Year Ended December 31,
	2020			2019		2018
Book (loss) income before income taxes	$	(240	)	$	7,258	$	1,872
Current	$	39		$	34	$	(430	)
Deferred		—			—		—
Total income tax expense (benefit)	$	39		$	34	$	(430	)

The differences between total income tax expense and the amount computed by applying the statutory income tax rate to income before taxes with respect to its TRS activity were as follows (in thousands):

	For the Year Ended December 31,
TRS	2020			2019			2018
Statutory Rate		21	%		21	%		21	%
Statutory rate applied to pre-tax income	$	(50	)	$	1,524		$	393
State tax expense net of federal income tax		33			27			—
AMT benefit refund		—			—			(430	)
Deferred tax impact of contributions of assets		(3,617	)		—			—
Deferred tax impact of tax rate change(A)		(300	)		(89	)		7,350
Valuation allowance decrease (increase) based on impact    of tax rate change(A)		300			89			(7,350	)
Valuation allowance increase (decrease) – other deferred		3,854			(1,608	)		(672	)
Other		(181	)		91			279
Total expense (benefit)	$	39		$	34		$	(430	)
Effective tax rate		(16.20	%)		0.47	%		(22.97	%)

(A) For the years ended December 31, 2020 and 2019, includes $0.3 million and $0.1 million, respectively, deferred tax impact of state tax rate change, and for the year ended December 31, 2018, includes $7.4 million deferred tax impact of federal tax rate change.  

Deferred tax assets and liabilities of the Company’s TRS were as follows (in thousands):

	For the Year Ended December 31,
	2020			2019
Deferred tax assets(A)	$	32,651		$	28,380
Deferred tax liabilities		(170	)		(53	)
Valuation allowance		(32,481	)		(28,327	)
Net deferred tax asset	$	—		$	—

(A) At December 31, 2020, primarily attributable to $14.8 million of net operating losses and $9.3 million of book/tax differences in joint venture investments and $3.7 million of capital loss carryforward.  The TRS net operating loss carryforwards will expire in varying amounts between the years 2024 and 2035.  

Reconciliation of GAAP net income attributable to SITE Centers to taxable income is as follows (in thousands):

	For the Year Ended December 31,
	2020			2019			2018
GAAP net income attributable to SITE Centers	$	35,721		$	100,699		$	114,434
Plus: Book depreciation and amortization(A)		154,051			152,707			237,383
Less: Tax depreciation and amortization(A)		(105,385	)		(107,830	)		(179,197	)
Book/tax differences on losses from capital transactions		(45,808	)		(52,733	)		(161,452	)
Joint venture equity loss (earnings), net(A)		10,572			(9,189	)		40,682
Deferred income		(13,197	)		(417	)		(8,436	)
Compensation expense		4,031			6,608			3,259
Impairment charges		24,593			18,914			80,746
Puerto Rico tax prepayment		—			—			3,991
RVI transaction costs		—			—			36,177
Miscellaneous book/tax differences, net		549			1,020			17,242
Taxable income before adjustments		65,127			109,779			184,829
Less: Capital gains		—			—			—
Taxable income subject to the 90% dividend requirement	$	65,127		$	109,779		$	184,829

(A) Depreciation expense from majority-owned subsidiaries and affiliates, which is consolidated for financial reporting purposes but not for tax reporting purposes, is included in the reconciliation item “Joint venture equity in earnings, net.”

Reconciliation between cash and stock dividends paid and the dividends paid deduction is as follows (in thousands):

	For the Year Ended December 31,
	2020			2019			2018
Cash Dividends paid	$	98,073		$	180,092		$	280,714
Stock Dividend due to RVI spin-off	—			—				593,659
Total Dividends		98,073			180,092			874,373
Less: Dividends designated to prior year		(5,133	)		(8,383	)		(8,383	)
Plus: Dividends designated from the following year		5,133			5,133			8,383
Less: Return of capital		(32,946	)		(67,063	)		(689,544	)
Dividends paid deduction	$	65,127		$	109,779		$	184,829