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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes |
17. | Income Taxes
Components of Loss before Income Taxes Components of loss before income taxes for the years ended December 31, are as follows (in thousands):
|  | 2011 |  |  | 2010 |  |  | 2009 |
Domestic |  | $ | (374,214) |  |  | $ | (1,193,059) |  |  | $ | (310,206) |
International |  |  | 131,531 |  |  |  | (426,902) |  |  |  | (38,908) |
Total |  | $ | (242,683) |  |  | $ | (1,619,961) |  |  | $ | (349,114) |
Summary of Current and Deferred Income Taxes Components of the provision for income taxes for the years ended December 31, are as follows (in thousands):
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | (9,392) |  |  | $ | 15,257 |  |  | $ | 13,586 |
International |  |  | 30,010 |  |  |  | 248 |  |  |  | 14,610 |
State and local |  |  | 4,177 |  |  |  | 9,947 |  |  |  | 1,066 |
Total Current |  |  | 24,795 |  |  |  | 25,452 |  |  |  | 29,262 |
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (1,333) |  |  |  | 13,913 |  |  |  | (22,529) |
International |  |  | (18,470) |  |  |  | (66,136) |  |  |  | (758) |
Total Deferred |  |  | (19,803) |  |  |  | (52,223) |  |  |  | (23,287) |
Total income tax expense (benefit), included in continuing and discontinued operations |  | $ | 4,992 |  |  | $ | (26,771) |  |  | $ | 5,975 |
Current Income Taxes Current income tax expense is generally a function of the level of income recognized by our TRSs, state income taxes, taxes incurred in foreign jurisdictions and interest and penalties associated with our income tax liabilities. For the years ended December 31, 2011, 2010 and 2009, we recognized a $9.0 million benefit, $11.8 million expense and $3.7 million benefit, respectively, related to the accruals for interest and penalties associated with our uncertain tax positions, offset by the benefit recognized from the reversal of certain expenses due to the expiration of the statute of limitations and settlements with the taxing authorities. During the years ended December 31, 2011, 2010 and 2009, cash paid for income taxes, net of refunds, was $41.2 million, $25.9 million and $234.6 million, respectively. Deferred Income Taxes Deferred income tax is generally a function of the period’s temporary differences (principally basis differences between tax and financial reporting for real estate assets and equity investees) and generation of tax net operating losses that may be realized in future periods depending on sufficient taxable income. For federal income tax purposes, certain acquisitions have been treated as tax-free transactions resulting in a carry-over basis in assets and liabilities for tax purposes. For financial reporting purposes and in accordance with purchase accounting, we record all of the acquired assets and liabilities at the estimated fair values at the date of acquisition. For our taxable subsidiaries, including international jurisdictions, we recognize the deferred income tax liabilities that represent the tax effect of the difference between the tax basis carried over and the fair value of the tangible and intangible assets at the date of acquisition. If taxable income is generated in these subsidiaries, we recognize a deferred income tax benefit in earnings as a result of the reversal of the deferred income tax liability previously recorded at the acquisition date and we record current income tax expense representing the entire current income tax liability. Any increases or decreases to the deferred income tax liability recorded in connection with these acquisitions, related to tax uncertainties acquired, are reflected in earnings. Deferred income tax assets and liabilities as of December 31, were as follows (in thousands):
|  | 2011 |  |  | 2010 |
Gross deferred income tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards(1) |  | $ | 443,026 |  |  | $ | 154,410 |
Basis difference - real estate properties |  |  | 211,069 |  |  |  | 116,280 |
Basis difference - equity investees |  |  | 20,008 |  |  |  | 31,804 |
Basis difference - intangibles |  |  | 24,664 |  |  |  | 28,239 |
Alternative minimum tax credit carryforward |  |  | 1,388 |  |  |  | 1,050 |
Foreign tax credit carryforward |  |  | 1,944 |  |  |  | - |
Section 163(j) interest limitation |  |  | 36,733 |  |  |  | - |
Other - temporary differences |  |  | 14,784 |  |  |  | 5,580 |
Total gross deferred income tax assets |  |  | 753,616 |  |  |  | 337,363 |
Valuation allowance |  |  | (641,064) |  |  |  | (248,582) |
Gross deferred income tax assets, net of valuation allowance |  |  | 112,552 |  |  |  | 88,781 |
Gross deferred income tax liabilities: |  |  |  |  |  |  |  |
Basis difference - real estate properties |  |  | 593,746 |  |  |  | 44,619 |
Built-in-gains - real estate properties |  |  | 6,402 |  |  |  | 6,402 |
Basis difference - equity investees |  |  | 1,118 |  |  |  | 10,176 |
Built-in-gains - equity investees |  |  | 22,111 |  |  |  | 23,766 |
Indemnification liabilities |  |  | 34,824 |  |  |  | 37,881 |
Basis difference - intangibles |  |  | 9,742 |  |  |  | - |
Other - temporary differences |  |  | 7,384 |  |  |  | 16,447 |
Total gross deferred income tax liabilities |  |  | 675,327 |  |  |  | 139,291 |
Net deferred income tax liabilities |  | $ | 562,775 |  |  | $ | 50,510 |
(1) | At December 31, 2011, we had net operating loss (“NOL”) carryforwards as follows (in millions):
|  | U.S. |  |  | Europe |  |  | Mexico |  |  | Japan |  |  | Other |
Gross NOL carryforward |  | $ | 88.5 |  |  | $ | 903.7 |  |  | $ | 342.6 |  |  | $ | 223.1 |  |  | $ | 50.6 |
Tax-effected NOL |  |  | 32.0 |  |  |  | 263.9 |  |  |  | 101.1 |  |  |  | 34.4 |  |  |  | 11.6 |
Valuation allowance |  |  | (32.0) |  |  |  | (230.2) |  |  |  | (100.4) |  |  |  | (34.4) |  |  |  | (11.6) |
Net deferred tax asset-NOL carryforward |  | $ | - |  |  | $ | 33.7 |  |  | $ | 0.7 |  |  | $ | - |  |  | $ | - |
Expiration periods |  |  | 2022 - 2031 |  |  |  | 2014 - indefinite |  |  |  | 2012 - 2021 |  |  |  | 2012 - 2018 |  |  |  | 2012 - 2031 |
The increase in deferred tax assets and liabilities from 2010 to 2011 is primarily due to the Merger and PEPR Acquisition. Deferred tax assets are primarily NOL carryforwards recorded for certain jurisdictions. Deferred income tax assets and liabilities resulted from fair market value adjustments recorded to the book basis of real estate properties. We recorded a valuation allowance against deferred tax assets in certain jurisdictions because we could not sustain a conclusion that it was more likely than not that we could realize the deferred tax assets and NOL carryforwards. The deferred tax asset valuation allowance is adequate to reduce the total deferred tax asset to an amount that will “more-likely-than-not” be realized, as we are not currently forecasting sufficient taxable income for these benefits to be realized. Liability for Uncertain Tax Positions For 2011, 2010 and 2009, we believe that we and our consolidated REIT subsidiary have complied with the REIT requirements of the Internal Revenue Code. The statute of limitations for our tax returns is generally three years. As such, our tax returns that remain subject to examination would be primarily from 2008 and thereafter. Our major tax jurisdictions outside the United States are Canada, France, Japan, Luxembourg, Mexico, Poland, and the United Kingdom. Certain 2003 through 2005 federal and state income tax returns of Catellus were under audit by the IRS and various state taxing authorities. In November 2011, we agreed to enter into a closing agreement with the IRS for the settlement of the 2003 through 2005 audits. We made cash payments of $24.5 million in 2011 in connection with this closing agreement and settlement of these federal and state tax audits. The liability for unrecognized tax benefits principally consists of estimated federal and state income tax liabilities and includes accrued interest and penalties of $26.4 million and $43.7 million at December 31, 2011 and 2010, respectively. A reconciliation of the liability for unrecognized tax benefits is as follows (in thousands):
|  | 2011 |  |  | 2010 |
Balance at January 1, |  | $ | 70,496 |  |  | $ | 65,170 |
Additions for tax positions taken during the current year |  |  | 8,061 |  |  |  | 531 |
Additions for tax positions taken during a prior year |  |  | 7,058 |  |  |  | 14,815 |
Reductions for tax positions taken during a prior year |  |  | (11,464) |  |  |  | (2,069) |
Settlements with taxing authorities |  |  | (24,835) |  |  |  | (2,539) |
Reductions due to lapse of applicable statute of limitations |  |  | (12,852) |  |  |  | (5,412) |
Balance at December 31, |  | $ | 36,464 |  |  | $ | 70,496 |
Indemnification Agreements We have indemnification agreements related to certain co-investment ventures operating outside of the United States for the contribution of certain properties. We may enter into agreements whereby we indemnify the ventures, or our venture partners, for taxes that may be assessed with respect to certain properties we contribute to these ventures. Our contributions to these ventures are generally structured as contributions of shares of companies that own the real estate assets. Accordingly, the capital gains associated with the step up in the value of the underlying real estate assets, for tax purposes, are deferred and transferred at contribution. We have generally indemnified these ventures to the extent that the ventures: (i) incur capital gains or withholding tax as a result of a direct sale of the real estate asset, as opposed to a transaction in which the shares of the company owning the real estate asset are transferred or sold or (ii) are required to grant a discount to the buyer of shares under a share transfer transaction as a result of the ventures transferring the embedded capital gain tax liability to the buyer of the shares in the transaction. The agreements limit the amount that is subject to our indemnification with respect to each property to 100% of the actual tax liabilities related to the capital gains that are deferred and transferred by us to the ventures at the time of the initial contribution less any deferred tax assets transferred with the property. The ultimate outcome under these agreements is uncertain as it is dependent on the method and timing of dissolution of the related venture or disposition of any properties by the venture. Two of our previous agreements were terminated without any amounts being due or payable by us. We consider the probability, timing and amounts in estimating our potential liability under the agreements. We have recorded liabilities of $34.8 million and $37.9 million at December 31, 2011 and 2010, respectively. We continue to monitor these agreements and the likelihood of the sale of assets that would result in recognition and will adjust the potential liability in the future as facts and circumstances dictate.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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