| Income Taxes | (11) Income Taxes
The Company has filed, for prior taxable years through its taxable
year ended December 31, 2013, a consolidated U.S. federal tax
return, which includes all of its wholly owned domestic
subsidiaries. For its taxable year commencing January 1, 2014,
the Company filed, and intends to continue to file, as a REIT, and
its TRSs filed, and intend to continue to file, as C corporations.
The Company also files tax returns in various states and countries.
The Company’s state tax returns reflect different
combinations of the Company’s subsidiaries and are dependent
on the connection each subsidiary has with a particular state. The
following information pertains to the Company’s income taxes
on a consolidated basis.
Income tax expense (benefit) consists of the following:
Current Deferred Total
Year ended December 31, 2015:
U.S. federal $ 7,686 $ (930 ) $ 6,756
State and local 1,746 (246 ) 1,500
Foreign 1,527 12,275 13,802
$ 10,959 $ 11,099 $ 22,058
Year ended December 31, 2014:
U.S. federal $ 8,721 $ (119,014 ) $ (110,293 )
State and local 2,632 (2,909 ) (277 )
Foreign 692 (214 ) 478
$ 12,045 $ (122,137 ) $ (110,092 )
Year ended December 31, 2013:
U.S. federal $ 930 $ 21,681 $ 22,611
State and local 1,609 1,165 2,774
Foreign 1,553 (4,097 ) (2,544 )
$ 4,092 $ 18,749 $ 22,841
The income tax provision for the year ended December 31, 2014
is net of the deferred tax benefit due to the REIT conversion of
$120,081. As of December 31, 2015 and 2014, the Company had
income taxes payable of $524 and $308, respectively, included in
accrued expenses. The U.S. and foreign components of earnings
before income taxes are as follows:
2015 2014 2013
U.S. $ 282,774 $ 144,298 $ 62,506
Foreign 1,854 (872 ) 474
Total $ 284,628 $ 143,426 $ 62,980
A reconciliation of significant differences between the reported
amount of income tax expense and the expected amount of income tax
expense that would result from applying the U.S. federal statutory
income tax rate of 35 percent to income before taxes is as
follows:
2015 2014 2013
Income tax expense at U.S. federal statutory rate $ 99,620 $ 50,199 $ 22,043
Tax adjustment related to REIT (a) (92,073 ) (44,891 )
—
State and local income taxes, net of federal income tax benefit 1,180 1,017 3,585
Book expenses not deductible for tax purposes 2,117 2,061 1,351
Stock-based compensation 66 (33 ) 65
Valuation allowance (b) 13,818
— (1,097 )
Rate change (c) 90 91 (2,565 )
Deferred tax adjustment due to REIT conversion
— (120,081 )
—
Other differences, net (2,760 ) 1,545 (541 )
Income tax expense $ 22,058 $ (110,092 ) $ 22,841
(a) Includes dividend paid deduction of
$83,750 and $62,937 for the tax years ended December 31, 2015 and
2014, respectively.
(b) In May of 2015, Puerto Rico’s
“Act 72 of 2015” was signed into law. Under the enacted
legislation, significant changes to the 2011 Internal Revenue Code
rendered the Company’s tax planning strategy to provide a
source of taxable income to support recognition of deferred tax
assets in Puerto Rico no longer feasible. As a result, for the year
ended December 31, 2015, a non-cash valuation allowance of $13,818
was recorded to income tax expense due to our limited ability to
utilize the Puerto Rico deferred tax assets in future years.
(c) In 2013, the “Tax Burden
Adjustment and Redistribution Act” was signed into law. Under
the enacted legislation, the Puerto Rico corporate income tax rate
was increased to 39% from 30%. As a result, a non-cash benefit of
$2,479 to income tax expense was recorded for the increase of the
Puerto Rico net deferred tax asset. Also in 2013, British Columbia
Bill 2 was signed into law. The enacted legislation increased the
general corporate income tax rate to 11% from 10%. As a result, a
non-cash benefit of $86 to income tax expense was recorded for the
increase of the Canadian net deferred tax asset.
The tax effect of temporary differences that give rise to
significant portions of the deferred tax assets and (liabilities)
are presented below:
2015 2014
Deferred tax assets:
Allowance for doubtful accounts $ 722 $ 255
Accrued liabilities not deducted for tax purposes 4,362 4,703
Asset retirement obligation 97 79
Net operating loss carry forwards 12,762 11,881
Tax credit carry forwards 155 209
Charitable contributions carry forward 6 9
Property, plant and equipment 1,080 65
Investment in partnerships 246 354
Gross deferred tax assets 19,430 17,555
Less: valuation allowance (13,827 ) (9 )
Net deferred tax assets 5,603 17,546
Deferred tax liabilities:
Intangibles (6,303 ) (4,321 )
Gross deferred tax liabilities (6,303 ) (4,321 )
Net deferred tax (liabilities) assets $ (700 ) $ 13,225
Classification in the consolidated balance sheets:
Current deferred tax assets $ 1,352 $ 729
Noncurrent deferred tax assets
— 12,496
Noncurrent deferred tax liabilities (2,052 )
—
Net deferred tax (liabilities) assets $ (700 ) $ 13,225
As of December 31, 2015, we have approximately $257,839 of
U.S. net operating loss carry forwards to offset future taxable
income. Of this amount, $4,011 is subject to an IRC §382
limitation. These carry forwards expire between 2020 through 2032.
In addition, we have $4,822 of various credits available to offset
future U.S. federal income tax.
As of December 31, 2015 we have approximately $488,294 of
state net operating loss carry forwards before valuation
allowances. These state net operating losses are available to
reduce future taxable income and expire at various times and
amounts. In addition, we have $201 of various credits available to
offset future state income tax. There was no valuation allowance
related to state net operating loss carry forwards as of
December 31, 2015 and 2014. The net change in the total state
valuation allowance for each of the years ended December 31,
2014, and 2013 was a decrease of $2,322 and $1,087, respectively.
There was no net charge in the total state valuation allowance for
the year ended December 31, 2015. The decrease in 2014 was
primarily due to the adjustment of deferred tax assets and related
valuation allowance for assets and liabilities of REIT operations
no longer subject to state income taxes at the REIT level, which
had the effect of valuing these assets at an expected rate of
0%.
During 2015, we generated $2,156 of Puerto Rico net operating
losses. As of December 31, 2015, we had approximately $30,523
of Puerto Rico net operating loss carry forwards before valuation
allowances. These Puerto Rico net operating losses are
available to offset future taxable income. These carry forwards
expire between 2016 and 2025. In addition, we have $155 of
alternative minimum tax credits available to offset future Puerto
Rico income tax.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income in those jurisdictions during the periods
in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities
(including the impact of available carry back and carry forward
periods), projected future taxable income, and tax-planning
strategies in making this assessment. In order to fully realize the
deferred tax assets, the Company will need to generate future
taxable income before the expiration of the carry forwards governed
by the tax code. Based on the current level of pretax earnings and
significant changes in Puerto Rico tax legislation, the Company
will not generate the minimum amount of future taxable income to
support the realization of the deferred tax assets. As a
result, management has determined that a valuation allowance
related to Puerto Rico net operating loss carry forwards and other
deferred tax assets is necessary. The valuation allowance for
these deferred tax assets as of December 31, 2015 and 2014 was
$13,827 and $9, respectively. The net change in the total
valuation allowance for the years ended December 31, 2015 and 2014
was an increase of $13,818. The amount of the deferred tax
asset considered realizable, however, could be adjusted in the near
term if estimates of future taxable income during the carry forward
period increase.
We have not recognized a deferred tax liability of approximately
$9,041 for the undistributed earnings of our Canadian operations
that arose in 2015 and prior years as management considers these
earnings to be indefinitely invested outside the U.S. As of
December 31, 2015, the undistributed earnings of these
subsidiaries were approximately $25,831.
Under ASC 740, we provide for uncertain tax positions, and the
related interest, and adjust recognized tax benefits and accrued
interest accordingly. We do not have any unrecognized tax
benefits that, if recognized in future periods, would impact our
effective tax rate for the years ended December 31, 2015 and
2014.
We are subject to income taxes in the U.S. and nearly all states.
In addition, the Company is subject to income taxes in Canada and
the Commonwealth of Puerto Rico. We are no longer subject to U.S
federal income tax examinations by tax authorities for years prior
to 2012, or for any U.S. state income tax audit prior to
2007. The IRS has completed a review of the 2013 income tax
return. With respect to Canada and Puerto
Rico, we are no longer subject to income tax audits for years
before 2012 and 2011, respectively. |
| Income Taxes | (6) Income Taxes
Income tax expense (benefit) consists of the following:
Current Deferred Total
Year ended December 31, 2015:
U.S. federal 7,686 (930 ) 6,756
State and local 1,746 (246 ) 1,500
Foreign 1,527 12,275 13,802
$ 10,959 $ 11,099 $ 22,058
Year ended December 31, 2014:
U.S. federal 8,993 (151,191 ) (142,198 )
State and local 2,579 (4,124 ) (1,545 )
Foreign 692 (213 ) 479
$ 12,264 $ (155,528 ) $ (143,264 )
Year ended December 31, 2013:
U.S. federal $ 930 $ 21,798 $ 22,728
State and local 1,609 1,184 2,793
Foreign 1,553 (4,097 ) (2,544 )
$ 4,092 $ 18,885 $ 22,977
The income tax provision for the year ended December 31, 2014
is net of the deferred tax benefit due to REIT conversion of
approximately $153,472. As of December 31, 2015 and
December 31, 2014, the Company had income taxes payable of
$524 and $308, respectively, included in accrued expenses.
The U.S. and foreign components of earnings before income taxes are
as follows:
2015 2014 2013
U.S. $ 283,107 $ 144,643 $ 62,841
Foreign 1,854 (872 ) 474
Total $ 284,961 $ 143,771 $ 63,315
A reconciliation of significant differences between the reported
amount of income tax expense and the expected amount of income tax
expense that would result from applying the U.S. federal statutory
income tax rate of 35 percent to income before taxes is as
follows:
2015 2014 2013
Income tax expense at U.S. federal statutory rate $ 99,736 $ 50,320 $ 22,160
Tax adjustment related to REIT (a) (92,189 ) (45,012 )
—
State and local income taxes, net of federal income tax benefit 1,180 1,017 3,601
Book expenses not deductible for tax purposes 2,117 2,061 1,351
Stock-based compensation 66 (33 ) 65
Valuation allowance (b) 13,818
— (1,094 )
Rate Change (c) 90 91 (2,565 )
Deferred tax adjustment due to REIT conversion
— (153,472 )
—
Other differences, net (2,760 ) 1,764 (541 )
Income tax expense $ 22,058 $ (143,264 ) $ 22,977
(a) Includes dividend paid deduction of
$83,866 and $63,058 for the tax years ended 2015 and 2014,
respectively.
(b) In 2015, Puerto Rico’s
“Act 72 of 2015” was signed into law. Under the enacted
legislation, significant changes to the 2011 Internal Revenue Code
rendered the Company’s tax planning strategy to provide a
source of taxable income to support recognition of deferred tax
assets in Puerto Rico no longer feasible. As a result, a non-cash
valuation allowance of $13,818 was recorded to income tax expense
due to our limited ability to utilize the Puerto Rico deferred tax
assets in future years.
(c) In 2013, the “Tax Burden
Adjustment and Redistribution Act” was signed into law. Under
the enacted legislation, the Puerto Rico corporate income tax rate
was increased to 39% from 30%. As a result, a non-cash benefit of
$2,479 to income tax expense was recorded for the increase of the
Puerto Rico net deferred tax asset. Also in 2013, British Columbia
Bill 2 was signed into law. The enacted legislation increased the
general corporate income tax rate to 11% from 10%. As a result, a
non-cash benefit of $86 to income tax expense was recorded for the
increase of the Canadian net deferred tax asset.
The tax effect of temporary differences that give rise to
significant portions of the deferred tax assets and (liabilities)
are presented below:
2015 2014
Deferred tax assets:
Allowance for doubtful accounts $ 722 $ 255
Accrued liabilities not deducted for tax purposes 4,362 4,703
Asset retirement obligation 97 79
Net operating loss carry forwards 12,762 11,881
Tax credit carry forwards 155 209
Charitable contributions carry forward 6 9
Property, plant and equipment 1,080 65
Investment in partnership 246 354
Gross deferred tax assets 19,430 17,555
Less: valuation allowance (13,827 ) (9 )
Net deferred tax assets 5,603 17,546
Deferred tax liabilities:
Intangibles (6,303 ) (4,321 )
Gross deferred tax liabilities (6,303 ) (4,321 )
Net deferred tax (liabilities) assets (700 ) $ 13,225
Classification in the consolidated balance sheets:
Current deferred tax assets $ 1,352 $ 729
Noncurrent deferred tax assets
— 12,496
Noncurrent deferred tax liabilities (2,052 )
—
Net deferred tax (liabilities) assets $ (700 ) $ 13,225
As of December 31, 2015, we have approximately $122,078 of
U.S. net operating loss carry forwards to offset future taxable
income. Of this amount, $4,011 is subject to an IRC §382
limitation. These carry forwards expire between 2020 and 2032. In
addition, we have $19,593 of various credits available to offset
future U.S. federal income tax.
As of December 31, 2015, we have approximately $450,573 state
net operating loss carry forwards before valuation allowances.
These state net operating losses are available to reduce future
taxable income and expire at various times and amounts. In
addition, we have $201 of various credits available to offset
future state income tax. There was no valuation allowance related
to state net operating loss carry forwards as of December 31,
2015 and December 31, 2014. The net change in the total
state valuation allowance for each of the years ended
December 31, 2014, and 2013 was a decrease of $1,751 and
$1,085, respectively. There was no net charge in the total state
valuation allowance for the year ended December 31, 2015. The
decrease in 2014 was primarily due to the adjustment of deferred
tax assets and related to valuation allowance for assets and
liabilities of REIT operations no longer subject to state income
taxes at the REIT level, which had the effect of valuing these
assets at an expected rate of 0%.
During 2015 we generated $2,156 of Puerto Rico net operating
losses. As of December 31, 2015, we had approximately $30,523
of Puerto Rico net operating loss carry forwards before valuation
allowances. These Puerto Rico net operating losses are
available to offset future taxable income. These carry forwards
expire between 2016 and 2025. In addition, we have $155 of
alternative minimum tax credits available to offset future Puerto
Rico income tax.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income in those jurisdictions during the periods
in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities
(including the impact of available carry back and carry forward
periods), projected future taxable income, and tax-planning
strategies in making this assessment. In order to fully realize the
deferred tax assets, the Company will need to generate future
taxable income before the expiration of the carry forwards governed
by the tax code. Based on the current level of pretax earnings and
significant changes in Puerto Rico tax legislation, the Company
will not generate the minimum amount of future taxable income to
support the realization of the deferred tax assets. As a
result, management has determined that a valuation allowance
related to Puerto Rico net operating loss carry forwards and other
deferred tax assets is necessary. The valuation allowance for
these deferred tax assets as of December 31, 2015 and 2014 was
$13,827 and $9, respectively. The net change in the total
valuation allowance for the years ended December 31, 2015 and 2014
was an increase of $13,818. The amount of the deferred tax
asset considered realizable, however, could be adjusted in the near
term if estimates of future taxable income during the carry forward
period increase.
We have not recognized a deferred tax liability of approximately
$9,041 for the undistributed earnings of our Canadian operations
that arose in 2015 and prior years as management considers these
earnings to be indefinitely invested outside the U.S. As of
December 31, 2015, the undistributed earnings of these
subsidiaries were approximately $25,831.
Under ASC 740, we provide for uncertain tax positions, and the
related interest, and adjust recognized tax benefits and accrued
interest accordingly. As of December 31, 2015 and 2014,
we do not have any unrecognized tax benefits that, if recognized in
future periods, would impact our effective tax rate.
We are subject to income taxes in the U.S. and nearly all states.
In addition, the Company is subject to income taxes in Canada and
the Commonwealth of Puerto Rico. We are no longer subject to U.S
federal income tax examinations by tax authorities for years prior
to 2012, or for any U.S. state income tax audit prior to
2007. The IRS has completed a review of the 2013 income tax
return. With respect to Canada and Puerto
Rico, we are no longer subject to income tax audits for years
before 2012 and 2011, respectively. |
