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Note 24 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 24. 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 were to fail 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 would 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, 2021, 2020 and 2019 (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (Estimated) |  |  | (Actual) |  |  | (Actual) |
GAAP net income attributable to the Company |  | $ | 844,059 |  |  | $ | 1,000,833 |  |  | $ | 410,605 |
GAAP net (income)/loss attributable to TRSs |  |  | (24,502 | ) |  |  | (956 | ) |  |  | 1,119 |
GAAP net income from REIT operations (1) |  |  | 819,557 |  |  |  | 999,877 |  |  |  | 411,724 |
Net book depreciation in excess of tax depreciation |  |  | 70,792 |  |  |  | (55,072 | ) |  |  | 55,903 |
Deferred/prepaid/above-market and below-market rents, net |  |  | (33,580 | ) |  |  | (16,632 | ) |  |  | (33,287 | )
Fair market value debt amortization |  |  | (18,079 | ) |  |  | (3,847 | ) |  |  | (4,510 | )
Book/tax differences from executive compensation |  |  | 19,882 |  |  |  | 10,388 |  |  |  | 6,026 |
Book/tax differences from non-qualified stock options |  |  | (1,069 | ) |  |  | (231 | ) |  |  | (1,121 | )
Book/tax differences from defined benefit plan |  |  | (2,948 | ) |  |  | - |  |  |  | - |
Book/tax differences from investments in and advances to real estate joint ventures |  |  | 25,502 |  |  |  | 40,176 |  |  |  | 4,837 |
Book/tax differences from sale of properties |  |  | (51,951 | ) |  |  | (10,547 | ) |  |  | (13,830 | )
Book/tax differences from accounts receivable |  |  | (19,971 | ) |  |  | 44,193 |  |  |  | 1,573 |
Book adjustment to property carrying values and marketable equity securities |  |  | (499,996 | ) |  |  | (589,698 | ) |  |  | 37,709 |
Taxable currency exchange gain/(loss), net |  |  | 882 |  |  |  | (29 | ) |  |  | (33 | )
Tangible property regulation deduction |  |  | - |  |  |  | (48,194 | ) |  |  | - |
GAAP gain on change in control of joint venture interests |  |  | (5,607 | ) |  |  | - |  |  |  | (137 | )
Dividends from TRSs |  |  | 23,314 |  |  |  | 2 |  |  |  | 3,331 |
Severance accrual |  |  | (5,358 | ) |  |  | 5,874 |  |  |  | (475 | )
Other book/tax differences, net (2) |  |  | (21,955 | ) |  |  | 802 |  |  |  | (3,946 | )
Adjusted REIT taxable income |  | $ | 299,415 |  |  | $ | 377,062 |  |  | $ | 463,764 |
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) | Includes Merger related costs of $20.7 million for the year ended December 31, 2021.
Characterization of Distributions The following characterizes distributions paid for tax purposes for the years ended December 31, 2021, 2020 and 2019, (amounts in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Preferred I Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 7,389 |  |  |  | 77 | %
Capital gain |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,207 |  |  |  | 23 | %
|  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 9,596 |  |  |  | 100 | %
Preferred J Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 11,541 |  |  |  | 77 | %
Capital gain |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,447 |  |  |  | 23 | %
|  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 14,988 |  |  |  | 100 | %
Preferred K Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 6,927 |  |  |  | 77 | %
Capital gain |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,069 |  |  |  | 23 | %
|  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | 8,996 |  |  |  | 100 | %
Preferred L Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 11,185 |  |  |  | 97 | % |  | $ | 4,382 |  |  |  | 38 | % |  | $ | 8,879 |  |  |  | 77 | %
Capital gain |  |  | 346 |  |  |  | 3 | % |  |  | 7,149 |  |  |  | 62 | % |  |  | 2,652 |  |  |  | 23 | %
|  | $ | 11,531 |  |  |  | 100 | % |  | $ | 11,531 |  |  |  | 100 | % |  | $ | 11,531 |  |  |  | 100 | %
Preferred M Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 13,469 |  |  |  | 97 | % |  | $ | 5,277 |  |  |  | 38 | % |  | $ | 10,692 |  |  |  | 77 | %
Capital gain |  |  | 417 |  |  |  | 3 | % |  |  | 8,609 |  |  |  | 62 | % |  |  | 3,194 |  |  |  | 23 | %
|  | $ | 13,886 |  |  |  | 100 | % |  | $ | 13,886 |  |  |  | 100 | % |  | $ | 13,886 |  |  |  | 100 | %
Common Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ordinary income |  | $ | 273,272 |  |  |  | 77 | % |  | $ | 133,849 |  |  |  | 38 | % |  | $ | 328,726 |  |  |  | 70 | %
Capital gain |  |  | 10,647 |  |  |  | 3 | % |  |  | 214,863 |  |  |  | 61 | % |  |  | 98,618 |  |  |  | 21 | %
Return of capital |  |  | 70,980 |  |  |  | 20 | % |  |  | 3,522 |  |  |  | 1 | % |  |  | 42,265 |  |  |  | 9 | %
|  | $ | 354,899 |  |  |  | 100 | % |  | $ | 352,234 |  |  |  | 100 | % |  | $ | 469,609 |  |  |  | 100 | %
Total dividends distributed for tax purposes |  | $ | 380,316 |  |  |  |  |  |  | $ | 377,651 |  |  |  |  |  |  | $ | 528,606 |  |  |  |  |
For the years ended December 31, 2021, 2020 and 2019 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. In connection with the Merger, the Company acquired Weingarten Investment Inc. (“WII”), a TRS of Weingarten. The Company is 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, 2021, 2020 and 2019, are summarized as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Income/(loss) before income taxes – U.S. |  | $ | 26,421 |  |  | $ | 1,051 |  |  | $ | (1,682 | )
(Provision)/benefit for income taxes, net: |  |  |  |  |  |  |  |  |  |  |  |
Federal: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (2,656 | ) |  |  | (482 | ) |  |  | 3,362 |
Deferred |  |  | 312 |  |  |  | 539 |  |  |  | (349 | )
Federal tax (provision)/benefit |  |  | (2,344 | ) |  |  | 57 |  |  |  | 3,013 |
State and local: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (456 | ) |  |  | (48 | ) |  |  | (26 | )
Deferred |  |  | 48 |  |  |  | 34 |  |  |  | (19 | )
State and local tax provision |  |  | (408 | ) |  |  | (14 | ) |  |  | (45 | )
Total tax (provision)/benefit – U.S. |  |  | (2,752 | ) |  |  | 43 |  |  |  | 2,968 |
Net income from U.S. TRSs |  | $ | 23,669 |  |  | $ | 1,094 |  |  | $ | 1,286 |
Loss before taxes – Non-U.S. |  | $ | (63 | ) |  | $ | (64 | ) |  | $ | (599 | )
(Provision)/benefit for Non-U.S. income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | - |  |  | $ | 479 |  |  | $ | (69 | )
Deferred |  |  | (529 | ) |  |  | - |  |  |  | 418 |
Non-U.S. tax (provision)/benefit |  | $ | (529 | ) |  | $ | 479 |  |  | $ | 349 |
In addition, the Company’s Provision for income taxes, net includes $0.1 million and $1.5 million of estimated state and local tax provision related to the REIT operations during the years ended December 31, 2021 and 2020, respectively. (Provision)/benefit for income taxes, net differs from the amounts computed by applying the statutory federal income tax rate to taxable income before income taxes as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal (provision)/benefit at statutory tax rate (1) |  | $ | (5,548 | ) |  | $ | (221 | ) |  | $ | 3,010 |
State and local provision, net of federal benefit (2) |  |  | 2,796 |  |  |  | (1,236 | ) |  |  | (42 | )
Total tax (provision)/benefit – U.S. |  | $ | (2,752 | ) |  | $ | (1,457 | ) |  | $ | 2,968 |
| (1) | 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.
| (2) | The year ended December 31, 2020 includes $1.5 million of estimated state and local tax provision related to the REIT operations.
Deferred Tax Assets, Liabilities and Valuation Allowances The Company’s deferred tax assets and liabilities at December 31, 2021 and 2020, were as follows (in thousands):
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Tax/GAAP basis differences |  | $ | 3,286 |  |  | $ | 29,105 |
Net operating losses (1) |  |  | 4,580 |  |  |  | 17,885 |
Tax credit carryforwards (2) |  |  | 2,340 |  |  |  | 2,340 |
Related party deferred losses |  |  | - |  |  |  | 619 |
Charitable contribution carryforwards |  |  | - |  |  |  | 23 |
Valuation allowance |  |  | (4,067 | ) |  |  | (36,957 | )
Total deferred tax assets |  |  | 6,139 |  |  |  | 13,015 |
Deferred tax liabilities |  |  | (8,058 | ) |  |  | (12,765 | )
Net deferred tax (liabilities)/assets |  | $ | (1,919 | ) |  | $ | 250 |
| (1) | Net operating losses expire in 2032.
| (2) | Expiration dates ranging from 2027 to 2035.
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, 2021 and 2020. 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 “TRS Merger”) and KRSI was dissolved. As a result of the TRS 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 TRS 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 TRS Merger date (the recognition period) which expired August 1, 2021. The maximum taxable amount with respect to all merged assets disposed within 60 months of the TRS Merger is limited to the aggregate net built-in gain at the TRS 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 TRS 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. As of August 1, 2021, the recognition period, as described above, terminated. As a result of the termination of the recognition period the Company wrote off deferred tax assets and deferred tax liabilities resulting from the TRS Merger. The Company recorded a full valuation allowance against these net deferred tax assets there was no income or loss recognized on the write off. The deferred tax assets that relate to net operating losses and tax credit carryforwards that can still be utilized by the Company remain on the books with a full valuation allowance against them. 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 has accrued $1.4 million and $1.5 million of non-current uncertain tax positions and related interest under the provisions of the authoritative guidance that addresses accounting for income taxes at December 31, 2021 and 2020, respectively, which are included in Other liabilities on the Company’s Consolidated Balance Sheets. The Company does not believe that the total amount of unrecognized tax benefits as of December 31, 2021, will significantly increase or decrease within the next 12 months. In August 2016, the Mexican Tax Authority issued 36 tax assessments against 32 entities, which includes certain joint ventures, that had previously held interests in operating properties in Mexico. These assessments are for certain income taxes, interest expense and withholding taxes subject to the controlling provisions of United States-Mexico Income Tax Convention (the “Treaty”). The assessments are for the 2010 tax year with 4 of the 32 entities also assessed for tax years 2007 and/or 2008. The assessments included 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 was $52.6 million. The Company believes 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 sought the assistance of the U.S. Competent Authority (Department of Treasury) (the “Authority”), responsible for administering U.S. tax treaties. The Authority acknowledged its agreement with the Company’s position and represented the Company regarding this matter with the Mexican Competent Authority, though no agreement resulted from their discussions. Accordingly, the Company filed annulment lawsuits in the Mexican Tax Court in September 2018 challenging these assessments. During April 2019, the appeals were argued at a hearing in the Superior Chamber of the Tax Court, and beginning in the fourth quarter of 2019, the court issued rulings on the 36 lawsuits, which found that $16.1 million ($12.8 million representing the Company’s share) of the total assessments were improperly assessed (the “Flat Tax Assessments”) but ruled in favor of the Mexican Tax Authority with respect to the balance of the assessments. Maintaining its position of compliance with the Treaty, the Company filed appeals in the Mexican Circuit (Appeals) Court with respect to the adverse rulings. The appeals were assigned to 18 separate Circuit Courts, all of which have ruled, and only one of which ruled in favor of the Company. The Company appealed the 35 unfavorable rulings to the Mexican Supreme Court and, during the fourth quarter of 2021, the court issued its rulings in favor of the Mexican Tax Authority for $45.5 million, however it did affirm and dismiss the improper Flat Tax Assessments, as noted above. The Company’s share of the estimated revised assessments is $41 million. Under Mexican tax law, interest and penalties are capped at 5 years and will no longer accrue on the final assessments, however, a statutory inflation factor will continue to increase unpaid liabilities. The Company believes it has operated in accordance with the Treaty provisions. In addition, based on legal opinions obtained by the Company, the assessed entities are the only entities liable and such entities have no assets. Therefore, given that the collection of these assessments by the Mexican tax authority is remote, the Company has not accrued any liability relating to this matter.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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