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Note 21 - Income Taxes | 12 Months Ended
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Dec. 31, 2015
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, 2015, 2014 and 2013 (in thousands):
|  | 201 5 (Estimated) |  |  | 201 4 (Actual) |  |  | 201 3 (Actual) |
GAAP net income attributable to the Company |  | $ | 894,115 |  |  | $ | 424,001 |  |  | $ | 236,281 |
Less: GAAP net income of taxable REIT subsidiaries |  |  | (11,727 | ) |  |  | (13,110 | ) |  |  | (5,950 | )
GAAP net income from REIT operations (a) |  |  | 882,388 |  |  |  | 410,891 |  |  |  | 230,331 |
Net book depreciation in excess of tax depreciation |  |  | 12,861 |  |  |  | 24,890 |  |  |  | 32,906 |
Capitalized leasing/legal commissions |  |  | (10,000 | ) |  |  | (13,576 | ) |  |  | - |
Deferred/prepaid/above and below market rents, net |  |  | (33,006 | ) |  |  | (17,967 | ) |  |  | (11,985 | )
Fair market value debt amortization |  |  | (21,956 | ) |  |  | (6,236 | ) |  |  | (3,510 | )
Restricted stock |  |  | (3,094 | ) |  |  | (1,078 | ) |  |  | (2,247 | )
Book/tax differences from non-qualified stock options |  |  | (4,786 | ) |  |  | (5,144 | ) |  |  | (255 | )
Book/tax differences from investments in real estate joint ventures |  |  | 27,462 |  |  |  | 8,614 |  |  |  | (11,928 | )
Book/tax difference on sale of property |  |  | (118,287 | ) |  |  | (146,173 | ) |  |  | 36,896 |
Foreign income tax from capital gains |  |  | 2,759 |  |  |  | - |  |  |  | (31,130 | )
Cumulative foreign currency translation adjustment & deferred tax adjustment |  |  | 20,851 |  |  |  | 139,976 |  |  |  | 5,095 |
Book adjustment to property carrying values and marketable equity securities |  |  | 7,861 |  |  |  | 62,817 |  |  |  | 22,811 |
Taxable currency exchange loss, net |  |  | (44,938 | ) |  |  | (100,602 | ) |  |  | (25,958 | )
Tangible property regulations deduction (b) |  |  | (130,000 | ) |  |  | - |  |  |  | - |
Dividends from taxable REIT subsidiaries |  |  | 65 |  |  |  | 67,590 |  |  |  | 2,980 |
GAAP change in control gain |  |  | (149,407 | ) |  |  | (107,235 | ) |  |  | 9,147 |
Other book/tax differences, net |  |  | 15,262 |  |  |  | (16,100 | ) |  |  | (3,262 | )
Adjusted REIT taxable income |  | $ | 454,035 |  |  | $ | 300,667 |  |  | $ | 249,891 |
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.
| (b) | In September 2013, the Internal Revenue Service released final Regulations governing when taxpayers like the Company must capitalize and depreciate costs for acquiring, maintaining, repairing and replacing tangible property and when taxpayers can deduct such costs. These Regulations permitted the Company to deduct certain types of expenditures that were previously required to be capitalized. The Regulations also allowed the Company to make a one-time election to immediately deduct certain amounts that were capitalized in previous years that are not required to be capitalized under the new Regulations. The Company elected to take its one-time allowable deduction in 2015, which totaled approximately $85.9 million.
Characterization of Distributions: The following characterizes distributions paid for tax purposes for the years ended December 31, 2015, 2014 and 2013, (in thousands):
|  | 2015 |  |  |  |  |  |  | 2014 |  |  |  |  |  |  | 2013 |  |  |  |  |
Preferred H Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | 6,762 |  |  |  | 56 | % |  | $ | 8,694 |  |  |  | 72 | %
Capital gain |  |  | 13,417 |  |  |  | 100 | % |  |  | 5,313 |  |  |  | 44 | % |  |  | 3,381 |  |  |  | 28 | %
|  | $ | 13,417 |  |  |  | 100 | % |  | $ | 12,075 |  |  |  | 100 | % |  | $ | 12,075 |  |  |  | 100 | %
Preferred I Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | 13,440 |  |  |  | 56 | % |  | $ | 17,280 |  |  |  | 72 | %
Capital gain |  |  | 24,000 |  |  |  | 100 | % |  |  | 10,560 |  |  |  | 44 | % |  |  | 6,720 |  |  |  | 28 | %
|  | $ | 24,000 |  |  |  | 100 | % |  | $ | 24,000 |  |  |  | 100 | % |  | $ | 24,000 |  |  |  | 100 | %
Preferred J Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | 6,930 |  |  |  | 56 | % |  | $ | 8,910 |  |  |  | 72 | %
Capital gain |  |  | 12,375 |  |  |  | 100 | % |  |  | 5,445 |  |  |  | 44 | % |  |  | 3,465 |  |  |  | 28 | %
|  | $ | 12,375 |  |  |  | 100 | % |  | $ | 12,375 |  |  |  | 100 | % |  | $ | 12,375 |  |  |  | 100 | %
Preferred K Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | 5,513 |  |  |  | 56 | % |  | $ | 6,064 |  |  |  | 72 | %
Capital gain |  |  | 9,844 |  |  |  | 100 | % |  |  | 4,331 |  |  |  | 44 | % |  |  | 2,358 |  |  |  | 28 | %
|  | $ | 9,844 |  |  |  | 100 | % |  | $ | 9,844 |  |  |  | 100 | % |  | $ | 8,422 |  |  |  | 100 | %
Common Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | 132,498 |  |  |  | 36 | % |  | $ | 157,393 |  |  |  | 46 | %
Capital Gain |  |  | 394,400 |  |  |  | 100 | % |  |  | 103,054 |  |  |  | 28 | % |  |  | 61,588 |  |  |  | 18 | %
Return of capital |  |  | - |  |  |  | - |  |  |  | 132,498 |  |  |  | 36 | % |  |  | 123,177 |  |  |  | 36 | %
|  | $ | 394,400 |  |  |  | 100 | % |  | $ | 368,050 |  |  |  | 100 | % |  | $ | 342,158 |  |  |  | 100 | %
Total dividends distributed for tax purposes |  | $ | 454,036 |  |  |  |  |  |  | $ | 426,344 |  |  |  |  |  |  | $ | 399,030 |  |  |  |  |
For the years ended December 31, 2015, 2014 and 2013 cash dividends paid for tax purposes were equivalent or in excess of the dividends paid deduction. 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”), Kimco Insurance Company (“KIC”), (collectively, the taxable entity “KRS Consolidated”) 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, Puerto Rico, 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, Puerto Rico and Mexico generally are not subject to withholding tax. The Company is subject to withholding taxes in Chile on sale transactions. As a result, the Company will incur a withholding tax on the repatriation of sale proceeds associated with the sale of the Company’s remaining property in Chile. The Company has determined this withholding tax to be $0.5 million. 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 taxable REIT subsidiary. 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, 2015, 2014 and 2013, are summarized as follows (in thousands):
|  | 201 5 |  |  | 201 4 |  |  | 201 3 |
Income/(loss) before income taxes – U.S. |  | $ | 23,729 |  |  | $ | 22,176 |  |  | $ | (4,849 | )
(Provision)/benefit for income taxes, net: |  |  |  |  |  |  |  |  |  |  |  |
Federal : |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (638 | ) |  |  | (522 | ) |  |  | (1,647 | )
Deferred |  |  | (7,355 | ) |  |  | (7,156 | ) |  |  | 9,725 |
Federal tax (provision)/benefit |  |  | (7,993 | ) |  |  | (7,678 | ) |  |  | 8,078 |
State and local: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (2,535 | ) |  |  | (165 | ) |  |  | 1,159 |
Deferred |  |  | (1,474 | ) |  |  | (1,223 | ) |  |  | 1,562 |
State tax (provision)/benefit |  |  | (4,009 | ) |  |  | (1,388 | ) |  |  | 2,721 |
Total tax (provision)/benefit – U.S. |  |  | (12,002 | ) |  |  | (9,066 | ) |  |  | 10,799 |
Net income from U.S. taxable REIT subsidiaries |  | $ | 11,727 |  |  | $ | 13,110 |  |  | $ | 5,950 |
Income before taxes – Non-U.S. |  | $ | 381,999 |  |  | $ | 116,184 |  |  | $ | 188,215 |
(Provision)/benefit for Non-U.S. income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current (1) |  | $ | (58,365 | ) |  | $ | (18,131 | ) |  | $ | (30,102 | )
Deferred |  |  | 4,331 |  |  |  | (6,749 | ) |  |  | 2,045 |
Non-U.S. tax provision |  | $ | (54,034 | ) |  | $ | (24,880 | ) |  | $ | (28,057 | )
| (1) | Includes $53.5 million in expense related to the sale of interest in 32 properties located in Canada.
The Company’s deferred tax assets and liabilities at December 31, 2015 and 2014, were as follows (in thousands):
|  | 2015 |  |  | 2014 |
Deferred tax assets: |  |  |  |  |  |  |  |
Tax/GAAP basis differences |  | $ | 49,601 |  |  | $ | 68,702 |
Net operating losses (1) |  |  | 40,100 |  |  |  | 51,142 |
Related party deferred losses |  |  | 1,549 |  |  |  | 3,843 |
Tax credit carryforwards |  |  | 5,304 |  |  |  | 3,899 |
Capital loss carryforwards |  |  | 4,593 |  |  |  | 3,995 |
Charitable contribution carryforwards |  |  | 22 |  |  |  | 11 |
Non-U.S. tax/GAAP basis differences |  |  | 4,555 |  |  |  | 10,566 |
Valuation allowance – U.S. |  |  | (25,045 | ) |  |  | (25,045 | )
Valuation allowance – Non-U.S. |  |  | (2,860 | ) |  |  | (9,257 | )
Total deferred tax assets |  |  | 77,819 |  |  |  | 107,856 |
Deferred tax liabilities – U.S. |  |  | (19,326 | ) |  |  | (25,503 | )
Deferred tax liabilities – Non-U.S. |  |  | (3,493 | ) |  |  | (6,812 | )
Net deferred tax assets |  | $ | 55,000 |  |  | $ | 75,541 |
| (1) | Expiration dates ranging from 2021 to 2033
As of December 31, 2015, the Company had net deferred tax assets of $55.0 million comprised of (i) $49.6 million of deferred tax assets and $19.3 million of deferred tax liabilities 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, (ii) $15.1 million for the tax effect of net operating loss carryovers, net of a valuation allowance within FNC of $25.0 million, (iii) $1.5 million for losses deferred for federal and state income tax purposes for transactions with related parties, (iv) $5.3 million for tax credit carryovers and (v) $4.6 million for capital loss carryovers, partially offset by (vi) $1.8 million of net deferred tax liabilities related to its investments in Canada and Mexico. General business tax credit carryovers of $2.5 million within KRS expire during taxable years from 2027 through 2034, and alternative minimum tax credit carryovers of $2.8 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. Deferred tax assets and deferred tax liabilities are included in the captions Other assets and Other liabilities on the accompanying Consolidated Balance Sheets at December 31, 2015 and 2014. 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, 2015, KRS Consolidated produced $31.9 million of taxable income and utilized $31.9 million of its $70.3 million of available net operating loss carryovers. For the year ended December 31, 2014, KRS Consolidated produced $49.3 million of taxable income and utilized $49.3 million of its $119.6 million of available net operating loss carryovers. 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. At December 31, 2015, the Company maintained a valuation allowance of $25.0 million to reduce the deferred tax asset of $40.1 million related to KRS Consolidated’s 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 the remaining net operating loss carryovers and determined a partial valuation allowance was appropriate. As of December 31, 2015, the Company determined that no valuation allowance was needed against the remaining $41.2 million net deferred tax asset within KRS Consolidated. The Company based its determination on an analysis of both positive and negative evidence using its judgment as to the relative weight of each. The Company believes, when evaluating KRS Consolidated’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 Consolidated’s ability to utilize its deferred tax assets also includes an estimate of future projected income. The projection of pre-tax book income and taxable income will generate 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 the net deferred tax assets (excluding net deferred tax assets of FNC discussed above) will be realized and therefore, no valuation allowance is needed at December 31, 2015. If future income projections do not occur as forecasted or the Company incurs additional impairment losses in excess of the amount earnings can absorb, the Company will reconsider the need for a valuation allowance. 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. 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):
|  | 201 5 |  |  | 201 4 |  |  | 201 3 |
Federal provision/(benefit) at statutory tax rate (35%) |  | $ | 8,304 |  |  | $ | 7,762 |  |  | $ | (1,697 | )
State and local provision/(benefit), net of federal benefit |  |  | 3,698 |  |  |  | 1,304 |  |  |  | (205 | )
Acquisition of FNC |  |  | - |  |  |  | - |  |  |  | (9,126 | )
Other |  |  | - |  |  |  | - |  |  |  | 229 |
Total tax provision/(benefit) – U.S. |  | $ | 12,002 |  |  | $ | 9,066 |  |  | $ | (10,799 | )
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. 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 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, 2015, will significantly increase or decrease within the next 12 months. As of December 31, 2015, the Company’s Canadian uncertain tax positions, which reduce its deferred tax assets, aggregated $5.1 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 2009 through 2015 and vary by jurisdiction and issue. The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2015 and 2014 were as follows (in thousands):
|  | 2015 |  |  | 2014 |
Balance, beginning of year |  | $ | 4,649 |  |  | $ | 4,590 |
Increases for tax positions related to current year |  |  | 1,084 |  |  |  | 59 |
Reductions due to lapsed statute of limitations |  |  | (1,470 | ) |  |  | - |
Balance, end of year |  | $ | 4,263 |  |  | $ | 4,649 |

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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 3: 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 4: 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 5: 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 + Details
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