22.

Income Taxes:

The Company elected to qualify as a REIT in accordance with the Code commencing with its taxable year which began

January

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 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 dividends 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 TRSs 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,

2016,

2015

and

2014

(in thousands):

	201 6			201 5			201 4
	(Estimated)			(Actual)			(Actual)
GAAP net income attributable to the Company	$	378,850		$	894,115		$	424,001
GAAP net loss/(income) of taxable REIT Subsidiaries		2,414			(6,073	)		(13,110	)
GAAP net income from REIT operations (a)		381,264			888,042			410,891
Net book depreciation in excess of tax depreciation		73,409			21,515			24,890
Capitalized leasing/legal commissions		(11,894	)		(14,246	)		(13,576	)
Deferred/prepaid/above-market and below-market rents, net		(35,230	)		(32,848	)		(17,967	)
Fair market value debt amortization		(15,953	)		(19,723	)		(6,236	)
Restricted stock		(4,490	)		(3,094	)		(1,078	)
Book/tax differences from non-qualified stock options		(11,301	)		(4,786	)		(5,144	)
Book/tax differences from investments in real estate joint ventures		(4,205	)		(294	)		8,614
Book/tax difference on sale of properties		(75,445	)		(64,270	)		(146,173	)
Foreign income tax from capital gains		-			5,873			-
Cumulative foreign currency translation adjustment & deferred tax adjustment		3,267			-			139,976
Book adjustment to property carrying values and marketable equity securities		29,042			4,484			62,817
Taxable currency exchange loss, net		(6,775	)		(47,297	)		(100,602	)
Tangible property regulations deduction (b)		(58,000	)		(126,957	)		-
Dividends from taxable REIT subsidiaries		-			647			67,590
GAAP change in control gain		(57,386	)		(149,407	)		(107,235	)
Valuation allowance against net deferred tax assets (see discussion below)		40,097			-			-
Other book/tax differences, net		(9,505	)		(3,618	)		(16,100	)
Adjusted REIT taxable income	$	236,895		$	454,021		$	300,667

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)

September

2013,

the Internal Revenue Service released final Regulations governing when taxpayers must capitalize and depreciate costs for acquiring, maintaining, repairing and replacing tangible property and when taxpayers must deduct such costs as repairs. Pursuant to these Regulations the Company deducted certain expenditures that would previously have been capitalized for tax purposes. The Regulations also allowed the Company to make an election to immediately deduct certain amounts that were capitalized in previous years but qualify as repairs under the new Regulations. The Company made such election in

2015

and deducted approximately

$85.9

million.

Characterization of Distributions

The following characterizes distributions paid for tax purposes for the years ended

December

31,

2016,

2015

and

2014,

(in thousands):

	201 6				2015				2014
Preferred H Dividends
Ordinary income	$	-	-		$	-	-		$	6,762	56	%
Capital gain		-	-			13,417	100	%		5,313	44	%
	$	-	-		$	13,417	100	%	$	12,075	100	%
Preferred I Dividends
Ordinary income	$	16,320	68	%	$	-	-		$	13,440	56	%
Capital gain		7,680	32	%		24,000	100	%		10,560	44	%
	$	24,000	100	%	$	24,000	100	%	$	24,000	100	%
Preferred J Dividends
Ordinary income	$	8,415	68	%	$	-	-		$	6,930	56	%
Capital gain		3,960	32	%		12,375	100	%		5,445	44	%
	$	12,375	100	%	$	12,375	100	%	$	12,375	100	%
Preferred K Dividends
Ordinary income	$	6,694	68	%	$	-	-		$	5,513	56	%
Capital gain		3,150	32	%		9,844	100	%		4,331	44	%
	$	9,844	100	%	$	9,844	100	%	$	9,844	100	%
Common Dividends
Ordinary income	$	263,892	62	%	$	-	-		$	132,498	36	%
Capital gain		127,689	30	%		394,400	100	%		103,054	28	%
Return of capital		34,050	8	%		-	-			132,498	36	%
	$	425,631	100	%	$	394,400	100	%	$	368,050	100	%
Total dividends distributed for tax purposes	$	471,850			$	454,036			$	426,344

For the years ended

December

31,

2016,

2015

and

2014

cash dividends paid for tax purposes were equivalent to, or in excess of, the dividends paid deduction.

Taxable REIT Subsidiaries 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 TRSs included KRS, FNC Realty Corporation, Kimco Insurance Company (collectively “KRS Consolidated”) and the consolidated entity, Blue Ridge Real Estate Company/Big Boulder Corporation. As part of the Company’s overall strategy to simplify its business model, the Company merged KRS, a TRS holding REIT-qualifying real estate and the Company’s investment in Albertsons, into a wholly-owned LLC and KRS was dissolved effective

August

2016.

Any non-REIT-qualifying assets or activities received by the Company in the Merger were transferred to a newly formed TRS, Kimco Realty Services II, Inc.

The Company is also subject to local non-U.S. taxes on certain investments located outside the U.S. In general, under local country law applicable to the entity ownership structures the Company has in place and applicable tax treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada, Puerto Rico and Mexico generally is not subject to withholding tax. The Company is subject to and 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 (loss)/income and benefit/(provision) 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,

2016,

2015

and

2014,

are summarized as follows (in thousands):

	201 6			201 5			201 4
(Loss)/income before income taxes – U.S.	$	(23,810	)	$	23,729		$	22,176
Benefit/(provision) for income taxes, net:
Federal:
Current		2,199			(638	)		(522	)
Deferred		(45,097	)		(7,355	)		(7,156	)
Federal tax provision		(42,898	)		(7,993	)		(7,678	)
State and local:
Current		1,057			(2,535	)		(165	)
Deferred		(8,812	)		(1,474	)		(1,223	)
State tax provision		(7,755	)		(4,009	)		(1,388	)
Total tax provision – U.S.		(50,653	)		(12,002	)		(9,066	)
Net (loss)/income from U.S. taxable REIT subsidiaries	$	(74,463	)	$	11,727		$	13,110

Income before taxes – Non-U.S.	$	138,253		$	381,999		$	116,184
(Provision)/benefit for Non-U.S. income taxes:
Current (1)	$	(24,393	)	$	(58,365	)	$	(18,131	)
Deferred		(3,537	)		4,331			(6,749	)
Non-U.S. tax provision	$	(27,930	)	$	(54,034	)	$	(24,880	)

(1)

For the years ended

December

31,

2016

and

2015

includes

$24.9

million and

$53.5

million, respectively, in expense related to the sale of interests in properties located in Canada.

(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 6			201 5			201 4
Federal provision at statutory tax rate (35%) (1)	$	(47,155	)	$	(8,304	)	$	(7,762	)
State and local provision, net of federal benefit (2)		(3,498	)		(3,698	)		(1,304	)
Total tax provision – U.S.	$	(50,653	)	$	(12,002	)	$	(9,066	)

(1)

For the year ended

December

31,

2016,

includes a

$55.6

million charge related to the recording of a deferred tax valuation allowance.

(2)

For the year ended

December

31,

2016,

includes a

$7.9

million charge related to the recording of a deferred tax valuation allowance.

Deferred Tax Assets,

Liabilities

and Valuation Allowances

The Company’s deferred tax assets and liabilities at

December

31,

2016

and

2015,

were as follows (in thousands):

	201 6			201 5
Deferred tax assets:
Tax/GAAP basis differences	$	63,167		$	49,601
Net operating losses (1)		44,833			40,100
Related party deferred losses		952			1,549
Tax credit carryforwards (2)		5,368			5,304
Capital loss carryforwards		3,659			4,593
Charitable contribution carryforwards		35			22
Non-U.S. tax/GAAP basis differences		513			4,555
Valuation allowance – U.S.		(95,126	)		(25,045	)
Valuation allowance – Non-U.S.		-			(2,860	)
Total deferred tax assets		23,401			77,819
Deferred tax liabilities – U.S.		(19,599	)		(19,326	)
Deferred tax liabilities – Non-U.S.		(559	)		(3,493	)
Net deferred tax assets	$	3,243		$	55,000

(1)

Expiration dates ranging from

2021

2033.

(2)

Expiration dates ranging from

2027

2034

and includes alternative minimum tax credit carryovers of

$3.1

million that do not expire.

The major differences between the GAAP basis of accounting and the basis of accounting used for federal and state income tax reporting consist of impairment charges recorded for GAAP purposes, but not recognized for tax purposes, depreciation and amortization, rental revenue recognized on the straight line method for GAAP, reserves for doubtful accounts, differences in GAAP and tax basis of assets sold, 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,

2016

and

2015.

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 tax year ended

August

2016,

KRS Consolidated produced

$20.6

million of taxable income and utilized

$20.6

million of its

$44.0

million of available net operating loss carryovers. For the year ended

December

31,

2015,

KRS Consolidated produced

$19.7

million of taxable income and utilized

$19.7

million of its

$70.3

million of available net operating loss carryovers.

Under GAAP a reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if, based on the evidence available, it is more likely than not (a likelihood of more than

percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. As a result of the Merger, the Company determined that the realization of

$63.5

million of its net deferred tax assets was not deemed more likely than not and as such, the Company recorded a full valuation allowance against these net deferred tax assets that existed at the time of the Merger.

The Company prepared an analysis of the tax basis built-in tax gain or built-in loss inherent in each asset acquired from KRS in the Merger. Assets of a TRS that become REIT assets in a merger transaction of the type entered into by the Company and KRS are subject to corporate tax on the aggregate net built-in gain (built-in gains in excess of built-in losses) during a recognition period. Accordingly, the Company is subject to corporate-level taxation on the aggregate net built-in gain from the sale of KRS assets within

months from the Merger date (the recognition period). The maximum taxable amount with respect to all merged assets disposed within

months of the Merger is limited to the aggregate net built-in gain at the Merger date. The Company compared fair value to tax basis for each property or asset to determine its built-in gain (value over basis) or built-in loss (basis over value) which could be subject to corporate level taxes if the Company disposed of the asset previously held by KRS during the

months following the Merger date. In the event that sales of KRS assets during the recognition period result in corporate level tax, the unrecognized tax benefits reported as deferred tax assets from KRS will be utilized to reduce the corporate level tax for GAAP purposes.

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

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 and Mexican Tax Authority. The resolution of these audits are not expected to have a material effect on the Company’s financial statements. The Company does not believe that the total amount of unrecognized tax benefits as of

December

31,

2016,

will significantly increase or decrease within the next

months.

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

2010

through

2016

and vary by jurisdiction and issue. The aggregate changes in the balance of unrecognized tax benefits for the years ended

December

31,

2016

and

2015

were as follows (in thousands):

	201 6			201 5
Balance at January 1,	$	4,263		$	4,649
Increases for tax positions related to current year		41			1,084
Increase for tax position due to ASU 2013-11		4,930			-
Decreases relating to settlements with taxing authorities		(2,000	)		-
Reductions due to lapsed statute of limitations		(2,272	)		(1,470	)
Balance at December 31,	$	4,962		$	4,263

The Company previously had unrecognized tax benefits reported as deferred tax assets primarily related to book to tax timing differences for depreciation expense on its Canadian real estate operating properties. With respect to the Company’s uncertain tax positions in Canada and in accordance with ASU

2013

Income Taxes (Topic

740):

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

," (“ASU

2013

11”),

the uncertain tax position liabilities in Canada were netted against these deferred tax assets. As of

December

31,

2016,

the Company, due to the sale of certain operating real estate properties in Canada, no longer had these related deferred tax assets to net against the related deferred tax liability and thus, the amount of its liability increased for uncertain tax positions associated with its Canadian operations. As of

December

31,

2016,

the Company’s Canadian uncertain tax positions aggregated

$4.9

million.

The Company and its subsidiaries had been under audit by the U.S. Internal Revenue Service (“IRS”) with respect to taxable years

2004

2009.

The IRS proposed, 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, and to assert a

100

percent “penalty” tax on the Company pursuant to Section

857(b)(7)

of the Code in the amount of

$40.9

million with respect to its

2009

taxable year. In

2016,

the Company and its subsidiaries favorably settled all matters relating to the audit, agreeing to a net refund of

$0.1

million. In connection with this favorable settlement, the Company released its uncertain tax position liability of

$2.0

million.

August

2016,

the Mexican Tax Authority issued tax assessments for various wholly-owned entities of the Company that had previously held interests in operating properties in Mexico. These assessments relate to certain interest expense and withholding tax items subject to the United States-Mexico Income Tax Convention (the “Treaty”). The assessments are for the

2010

tax year and include amounts for taxes aggregating

$33.7

million, interest aggregating

$16.5

million and penalties aggregating

$11.4

million. The Company believes that it has operated in accordance with the Treaty provisions and has therefore concluded that no amounts are payable with respect to this matter. The Company has submitted appeals for these assessments and the U.S. Competent Authority (Department of Treasury) is representing the Company regarding this matter with the Mexican Competent Authority. The Company intends to vigorously defend its position and believes it will prevail, however this outcome cannot be assured.