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Note 21 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
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 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, 2019, 2018 and 2017 (in thousands):
|  | 201 9 |  |  | 2018 |  |  | 2017 |
|  | (Estimated) |  |  | (Actual) |  |  | (Actual) |
GAAP net income attributable to the Company |  | $ | 410,605 |  |  | $ | 497,795 |  |  | $ | 426,075 |
GAAP net loss/(income) attributable to TRSs |  |  | 1,117 |  |  |  | (2,436 | ) |  |  | (12,406 | )
GAAP net income from REIT operations (1) |  |  | 411,722 |  |  |  | 495,359 |  |  |  | 413,669 |
Net book depreciation in excess of tax depreciation |  |  | 56,094 |  |  |  | 46,754 |  |  |  | 122,043 |
Capitalized leasing/legal commissions |  |  | - |  |  |  | (15,268 | ) |  |  | (7,102 | )
Deferred/prepaid/above-market and below-market rents, net |  |  | (33,518 | ) |  |  | (23,466 | ) |  |  | (29,364 | )
Fair market value debt amortization |  |  | (4,412 | ) |  |  | (5,268 | ) |  |  | (8,495 | )
Book/tax differences from executive compensation (2) |  |  | 6,026 |  |  |  | 5,460 |  |  |  | 2,396 |
Book/tax differences from non-qualified stock options |  |  | (1,121 | ) |  |  | (112 | ) |  |  | (172 | )
Book/tax differences from investments in and advances to real estate joint ventures |  |  | (606 | ) |  |  | 26,263 |  |  |  | (24,992 | )
Book/tax differences from sale of properties |  |  | 18,692 |  |  |  | (13,612 | ) |  |  | (86,629 | )
Book adjustment to property carrying values and marketable equity securities |  |  | 31,980 |  |  |  | 59,866 |  |  |  | 51,309 |
Taxable currency exchange gains/(losses), net |  |  | (33 | ) |  |  | 929 |  |  |  | (780 | )
Tangible property regulation deduction |  |  | - |  |  |  | (40,361 | ) |  |  | (52,809 | )
GAAP gain on change in control of joint venture interests |  |  | (137 | ) |  |  | (6,800 | ) |  |  | (71,160 | )
Dividends from TRSs |  |  | 3,331 |  |  |  | 526 |  |  |  | 1,226 |
Other book/tax differences, net |  |  | (3,166 | ) |  |  | 775 |  |  |  | 2,056 |
Adjusted REIT taxable income |  | $ | 484,852 |  |  | $ | 527,045 |  |  | $ | 311,196 |
Certain amounts in the prior periods have been reclassified to conform to the current year presentation, in the table above.
(1) | All adjustments to "GAAP net income from REIT operations" are net of amounts attributable to noncontrolling interests and TRSs.
(2) | In accordance with the Tax Cuts and Jobs Act, effective for tax years beginning on January 1, 2018, Section 162(m) of the Code a $1.0 million limit per executive was placed on the amount a company can deduct for executive compensation for each of their CEO, CFO and the other three most highly paid executives.
Characterization of Distributions The following characterizes distributions paid for tax purposes for the years ended December 31, 2019, 2018 and 2017, (amounts in thousands):
|  | 201 9 |  |  | 201 8 |  |  | 201 7 |
Preferred I Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 7,389 |  |  |  | 77 | % |  | $ | 5,565 |  |  |  | 53 | % |  | $ | 21,636 |  |  |  | 96 | %
Capital gain |  |  | 2,207 |  |  |  | 23 | % |  |  | 4,935 |  |  |  | 47 | % |  |  | 902 |  |  |  | 4 | %
|  | $ | 9,596 |  |  |  | 100 | % |  | $ | 10,500 |  |  |  | 100 | % |  | $ | 22,538 |  |  |  | 100 | %
Preferred J Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 11,541 |  |  |  | 77 | % |  | $ | 6,559 |  |  |  | 53 | % |  | $ | 11,880 |  |  |  | 96 | %
Capital gain |  |  | 3,447 |  |  |  | 23 | % |  |  | 5,816 |  |  |  | 47 | % |  |  | 495 |  |  |  | 4 | %
|  | $ | 14,988 |  |  |  | 100 | % |  | $ | 12,375 |  |  |  | 100 | % |  | $ | 12,375 |  |  |  | 100 | %
Preferred K Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 6,927 |  |  |  | 77 | % |  | $ | 5,217 |  |  |  | 53 | % |  | $ | 9,450 |  |  |  | 96 | %
Capital gain |  |  | 2,069 |  |  |  | 23 | % |  |  | 4,627 |  |  |  | 47 | % |  |  | 394 |  |  |  | 4 | %
|  | $ | 8,996 |  |  |  | 100 | % |  | $ | 9,844 |  |  |  | 100 | % |  | $ | 9,844 |  |  |  | 100 | %
Preferred L Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 8,879 |  |  |  | 77 | % |  | $ | 6,111 |  |  |  | 53 | % |  | $ | 1,814 |  |  |  | 96 | %
Capital gain |  |  | 2,652 |  |  |  | 23 | % |  |  | 5,420 |  |  |  | 47 | % |  |  | 76 |  |  |  | 4 | %
|  | $ | 11,531 |  |  |  | 100 | % |  | $ | 11,531 |  |  |  | 100 | % |  | $ | 1,890 |  |  |  | 100 | %
Preferred M Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 10,692 |  |  |  | 77 | % |  | $ | 6,031 |  |  |  | 53 | % |  | $ | - |  |  |  | - |
Capital gain |  |  | 3,194 |  |  |  | 23 | % |  |  | 5,348 |  |  |  | 47 | % |  |  | - |  |  |  | - |
|  | $ | 13,886 |  |  |  | 100 | % |  | $ | 11,379 |  |  |  | 100 | % |  | $ | - |  |  |  | - |
Common Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 328,726 |  |  |  | 70 | % |  | $ | 235,642 |  |  |  | 50 | % |  | $ | 260,573 |  |  |  | 57 | %
Capital gain |  |  | 98,618 |  |  |  | 21 | % |  |  | 212,077 |  |  |  | 45 | % |  |  | 9,143 |  |  |  | 2 | %
Return of capital |  |  | 42,265 |  |  |  | 9 | % |  |  | 23,564 |  |  |  | 5 | % |  |  | 187,430 |  |  |  | 41 | %
|  | $ | 469,609 |  |  |  | 100 | % |  | $ | 471,283 |  |  |  | 100 | % |  | $ | 457,146 |  |  |  | 100 | %
Total dividends distributed for tax purposes |  | $ | 528,606 |  |  |  |  |  |  | $ | 526,912 |  |  |  |  |  |  | $ | 503,793 |  |  |  |  |
For the years ended December 31, 2019, 2018 and 2017 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 include Kimco Realty Services II, Inc. (“KRS”), FNC Realty Corporation, Kimco Insurance Company (collectively “KRS Consolidated”) and the consolidated entity, Blue Ridge Real Estate Company/Big Boulder Corporation. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, making significant changes to taxation of corporations and individuals. Effective for tax years beginning on January 1, 2018, this tax reform law reduces the federal statutory income tax rate from 35% to 21% for corporations and changed other certain tax provisions and deductions. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. As a result, the Company remeasured its deferred tax assets and liabilities and recorded a tax provision of $1.1 million during 2017. 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 primarily held by the Company at the REIT level and not in the Company’s TRSs. 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 are accounted for 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 TRSs and taxable entities which have been consolidated for accounting reporting purposes, for the years ended December 31, 2019, 2018 and 2017, are summarized as follows (in thousands):
| 201 9 |  | 201 8 |  | 2017 |
(Loss)/income before income taxes – U.S. | $ | (1,682 | ) | $ | 4,331 |  | $ | 1,487 |
Benefit/(provision) for income taxes, net: |  |  |  |  |  |  |  |  |
Federal: |  |  |  |  |  |  |  |  |
Current |  | 3,362 |  |  | (1,221 | ) |  | (704 | )
Deferred |  | (349 | ) |  | (1,198 | ) |  | (632 | )
Federal tax benefit/(provision) |  | 3,013 |  |  | (2,419 | ) |  | (1,336 | )
State and local: |  |  |  |  |  |  |  |  |
Current |  | (26 | ) |  | (43 | ) |  | (66 | )
Deferred |  | (19 | ) |  | (414 | ) |  | (190 | )
State tax provision |  | (45 | ) |  | (457 | ) |  | (256 | )
Total tax benefit/(provision) – U.S. |  | 2,968 |  |  | (2,876 | ) |  | (1,592 | )
Net income/(loss) from U.S. TRSs | $ | 1,286 |  | $ | 1,455 |  | $ | (105 | )
(Loss)/income before taxes – Non-U.S. | $ | (599 | ) | $ | 2,384 |  | $ | (11,483 | )
(Provision)/benefit for Non-U.S. income taxes: |  |  |  |  |  |  |  |  |
Current | $ | (69 | ) | $ | 1,634 |  | $ | 2,425 |
Deferred |  | 418 |  |  | (358 | ) |  | 47 |
Non-U.S. tax benefit | $ | 349 |  | $ | 1,276 |  | $ | 2,472 |
Provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate to taxable income before income taxes as follows (in thousands):
|  | 201 9 |  |  | 201 8 |  |  | 201 7 |
Federal benefit/(provision) at statutory tax rate* (1) (3) |  | $ | 3,010 |  |  | $ | (2,490 | ) |  | $ | (520 | )
State and local provision, net of federal benefit (2) |  |  | (42 | ) |  |  | (386 | ) |  |  | (1,072 | )
Total tax benefit/(provision) – U.S. |  | $ | 2,968 |  |  | $ | (2,876 | ) |  | $ | (1,592 | )
* Federal statutory tax rate of 21% for the years ended December 31, 2019 and 2018 and federal statutory tax rate of 35% for the year ended December 31, 2017.
(1) | The year ended December 31, 2018 includes a charge of $1.6 million related to the recording of a deferred tax valuation allowance.
(2) | The year ended December 31, 2018 includes a charge of $0.3 million related to the recording of a deferred tax valuation allowance.
(3) | The year ended December 31, 2019 includes a tax benefit from AMT Credit refunds of $3.7 million and $1.1 million 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, 2019 and 2018, were as follows (in thousands):
|  | 201 9 |  |  | 201 8 |
Deferred tax assets: |  |  |  |  |  |  |  |
Tax/GAAP basis differences |  | $ | 29,618 |  |  | $ | 28,865 |
Net operating losses (1) |  |  | 20,917 |  |  |  | 20,947 |
Tax credit carryforwards (2) |  |  | 2,340 |  |  |  | 6,064 |
Capital loss carryforwards |  |  | 2,270 |  |  |  | 2,270 |
Related party deferred losses |  |  | 619 |  |  |  | 619 |
Charitable contribution carryforwards |  |  | 23 |  |  |  | 23 |
Valuation allowance |  |  | (42,703 | ) |  |  | (45,413 | )
Total deferred tax assets |  |  | 13,084 |  |  |  | 13,375 |
Deferred tax liabilities |  |  | (12,844 | ) |  |  | (12,768 | )
Net deferred tax assets |  | $ | 240 |  |  | $ | 607 |
| (1) | Expiration dates ranging from 2021 to 2032.
| (2) | Expiration dates ranging from 2027 to 2035 and tax year 2018 includes alternative minimum tax credit carryovers of $3.5 million that did not expire. The alternative minimum tax credits were recognized in 2019.
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, above-market and below-market lease amortization, 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 Company's Consolidated Balance Sheets at December 31, 2019 and 2018. Operating losses and the valuation allowance are related primarily to the Company’s consolidation of its TRSs for accounting and reporting purposes. 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 50%) 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. Effective August 1, 2016, the Company merged Kimco Realty Services, Inc. (“KRSI”), a TRS holding REIT qualifying real estate, into a wholly owned LLC (the “Merger”) and KRSI was dissolved. As a result of the Merger, the Company determined that the realization of its then 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 KRSI in the Merger. Assets of a TRS that become REIT assets in a merger transaction of the type entered into by the Company and KRSI 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 KRSI assets within 60 months from the Merger date (the recognition period). The maximum taxable amount with respect to all merged assets disposed within 60 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 KRSI during the 60 months following the Merger date. In the event that sales of KRSI assets during the recognition period result in corporate level tax, the unrecognized tax benefits reported as deferred tax assets from KRSI 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 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 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, 2019, will significantly increase or decrease within the next 12 months. The liability for uncertain tax benefits principally consists of estimated foreign tax liabilities in years for which the statute of limitations is open. Open years range from 2010 through 2018 and vary by jurisdiction and issue. The aggregate changes in the balance of unrecognized tax benefits, associated with the Company’s previously held interests in Canada, for the years ended December 31, 2019 and 2018 were as follows (in thousands):
|  | 201 9 |  |  | 201 8 |
Balance at January 1, |  | $ | 2,806 |  |  | $ | 3,991 |
Changes in tax positions related to current year (1) |  |  | 16 |  |  |  | (250 | )
Reductions due to lapsed statute of limitations |  |  | (434 | ) |  |  | (935 | )
Balance at December 31, |  | $ | 2,388 |  |  | $ | 2,806 |
| (1) | Amounts relate to increases/(decreases) from foreign currency translation adjustments.
During August 2016, the Mexican Tax Authority issued tax assessments against 35 entities, including certain joint ventures, of the Company that had previously held interests in operating properties in Mexico. These assessments relate to certain income tax, interest expense and withholding tax items subject to the United States-Mexico Income Tax Convention (the “Treaty”). The assessments were for the 2010 tax year with four of the 35 entities also assessed for the years 2007 and/or 2008. The assessments include amounts for taxes aggregating $33.7 million, interest aggregating $16.5 million and penalties aggregating $11.4 million. The Company’s aggregate share of these amounts is $52.6 million. The Company filed appeals in the Mexican Tax Court in September 2018 challenging these assessments, as it 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 U.S. Competent Authority (Department of Treasury), responsible for administering U.S. tax treaties, indicates agreement with this position and has represented the Company regarding this matter with the Mexican Competent Authority. During April 2019, all the appeals were argued at a hearing in the Superior Chamber of the Tax Court. During November and December 2019, the Mexican Tax Court issued its ruling on 25 of the 35 total assessments which found that $17.9 million ($14.7 million representing the Company’s share) of the total assessment was improperly assessed, but ruled in favor of the Mexican Tax Authority with respect to the balance of the assessments. Regarding the portion of the ruling in favor of the Mexican Tax Authority, the Company believes it has operated in accordance with the Treaty provisions and has therefore not changed its position on this matter. The Company has filed appeals for the rulings it has received. The remaining 10 rulings, not yet received, are expected to be consistent with the current rulings and the Company intends to appeal these when received. The Company intends to continue to vigorously defend its position and believes it will prevail, however this outcome cannot be assured.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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