During the year ended December 31, 2020, and consistent with AIR’s simplified business structure and strategy, we have elected to treat one of our taxable subsidiaries as a REIT under the Code, commencing with its initial taxable year ended December 31, 2021. As a result, AIR will incur less income taxes on a consolidated basis, providing more cash for distributions and other corporate uses.

As a REIT, this subsidiary will generally be allowed a deduction for dividends that it pays, and therefore, will not be subject to United States federal corporate income tax on the taxable income that is currently distributed to stockholders, however, may be subject to certain state gross income and franchise taxes, as well as taxes on any undistributed income and federal and state corporate taxes on any income earned.

The income tax effects of a REIT conversion for financial reporting purposes are reflected in the period in which all significant actions necessary to qualify as a REIT are completed and the entity has committed to becoming a REIT, including (i) obtaining approval from the appropriate parties; (ii) purging through a distribution to stockholders any accumulated earnings and profits from its operations as a C corporation; and (iii) having any remaining actions for the entity to achieve REIT status be perfunctory legal and administrative matters. The only remaining action for this subsidiary to achieve REIT status is to file its federal income tax return for tax year ended December 31, 2021 as a REIT on its required filing date. All significant actions necessary to qualify as a REIT were met as of December 31, 2020, and as such its deferred tax assets and liabilities as of that date were adjusted to reflect a tax rate of zero percent, resulting in the elimination of its deferred tax assets and liabilities as of December 31, 2020.

Significant components of our deferred tax liabilities and assets are as follows (in thousands):

	December 31,
	2020			2019
Deferred tax liabilities:
Real estate and real estate partnership basis differences	$	(13	)	$	—
Deferred tax assets:
Real estate and real estate partnership basis differences		—			17,316
Tax credit carryforwards		—			53,776
Net operating, capital, and other loss carryforwards		—			6,147
Accruals and expenses		—			6,138
Management contracts and other		—			1,905
Total deferred tax assets		—			85,282
Valuation allowance		—			(4,766	)
Net deferred tax (liabilities) assets	$	(13	)	$	80,516

As of December 31, 2020, net deferred tax liabilities were presented in accrued liabilities and other in our consolidated balance sheets. As of December 31, 2019, net deferred tax assets were presented in other assets in our consolidated balance sheets.

A reconciliation of the beginning and ending balance of our unrecognized tax benefits is presented below (in thousands):

	2020			2019			2018
Balance at January 1	$	5,080		$	2,618		$	2,476
Additions based on tax position taken in current year (1)		(4,625	)		2,758			—
Additions based on tax positions related to prior years		(218	)		226			142
Reductions as a result of a lapse of the applicable statutes		4,203			(522	)		—
Balance at December 31	$	4,440		$	5,080		$	2,618

Because the statute of limitations has not yet elapsed, our United States federal income tax returns for the year ended December 31, 2017, and subsequent years and certain of our state income tax returns for the year ended December 31, 2017, and subsequent years are currently subject to examination by the IRS or other taxing authorities. If recognized, the unrecognized benefit would affect the effective rate.

Our policy is to include any interest and penalties related to income taxes within the income tax line item in our consolidated statements of operations.

Significant components of the income tax benefit or expense are as follows and are classified within income tax benefit in our consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018 (in thousands):

	2020			2019			2018
Current:
Federal	$	6,271		$	5,204		$	11,269
State		8,637			8,558			10,218
Total current		14,908			13,762			21,487
Deferred:
Federal		(7,691	)		(8,575	)		(29,243	)
State		(2,694	)		(4,882	)		(5,590	)
Revaluation of deferred taxes due to change in tax rate		90,914			—			—
Total deferred		80,529			(13,457	)		(34,833	)
Total expense (benefit)	$	95,437		$	305		$	(13,346	)

Consolidated income from continuing operations or loss from continuing operations subject to tax consists of pretax income or loss from the continuing operations of our TRS entities and income and gains retained by the continuing operations of the REIT. For the years ended December 31, 2020, 2019, and 2018, we had consolidated net loss from continuing operations subject to tax of $16.7 million, net loss from continuing operations subject to tax of $13.5 million, and net income from continuing operations subject to tax of $133.3 million, respectively.

The reconciliation of income tax attributable to continuing operations computed at the United States statutory rate to income tax benefit is shown below (dollars in thousands):

	2020						2019						2018
	Amount			Percent			Amount			Percent			Amount			Percent
Tax (benefit) provision at United States statutory rates on consolidated income or loss from continuing operations subject to tax	$	(3,516	)		21.0	%	$	(2,836	)		21.0	%	$	33,296			21.0	%
State income tax expense, net of federal tax (benefit) expense		(1,964	)		11.7	%		3,935			(29.1	%)		11,933			7.7	%
Effect of permanent differences		434			(2.6	%)		(139	)		1.0	%		302			0.2	%
Tax effect of intercompany transactions (1)		—			—	%		—			—	%		(33,250	)		(21.0	%)
Tax credits		(296	)		1.8	%		(667	)		4.9	%		(6,897	)		(4.4	%)
Tax reform revaluation		—			—	%		—			—	%		288			0.2	%
Decrease in valuation allowance		—			—	%		(164	)		1.2	%		(20,434	)		(12.9	%)
Separation		7,596			(45.4	%)		—			—	%		—			—	%
TRS REIT election (2)		90,914			(543.1	%)		—			—	%		—			—	%
Other		2,269			(13.6	%)		176			(1.3	%)		1,416			0.9	%
Total income tax expense (benefit)	$	95,437			(570.2	%)	$	305			(2.3	%)	$	(13,346	)		(8.3	%)

For income tax purposes, dividends paid to holders of Common Stock primarily consist of ordinary income, capital gains, qualified dividends, unrecaptured Section 1250 gains, and return of capital, or a combination thereof. For the years ended December 31, 2020, 2019, and 2018, dividends per share held for the entire year were estimated to have the following tax attributes:

	2020					2019					2018
(unaudited)	Amount		Percentage			Amount		Percentage			Amount		Percentage
Ordinary income	$	2.41		6.0	%	$	0.66		20.7	%	$	0.51		33.4	%
Capital gains		15.00		37.4	%		1.29		40.4	%		0.93		61.2	%
Qualified dividends		0.48		1.2	%		0.66		20.7	%		—		—	%
Unrecaptured Section 1250 gain		6.74		16.8	%		0.58		18.2	%		0.08		5.4	%
Return of capital		15.49		38.6	%		—		—	%		—		—	%
Total	$	40.12		100.0	%	$	3.19		100.0	%	$	1.52		100.0	%