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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Taxes |
Income Taxes | (18) Income Taxes For the year ended December 31, 2013, the Company recorded an income tax expense of $5.9 million as compared to an income tax benefit of $1.6 million and an income tax expense of $1.2 million for the years ended December 31, 2012 and 2011 respectively. The Company's income tax expense from discontinued operations was insignificant for the years ended December 31, 2013, 2012 and 2011. The Company's deferred income tax expense and its balance in deferred tax assets and liabilities were insignificant as of December 31, 2013, 2012 and 2011. The Company files numerous U.S. federal, state and local income and franchise tax returns. With a few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by taxing authorities for years prior to 2010. At December 31, 2013 and 2012, the tax basis of the Company's net assets is less than the reported amounts by $7.7 billion and $7.6 billion, respectively. The difference between the reported amounts and the tax basis is primarily related to the Slough Estates USA, Inc. ("SEUSA") and HCR ManorCare acquisitions, which occurred in 2007 and 2011, respectively. Both SEUSA and HCR ManorCare were corporations subject to federal and state income taxes. As a result of these acquisitions, the Company succeeded to the tax attributes of SEUSA and HCR ManorCare, including the tax basis in the acquired companies' assets and liabilities. The Company generally will be subject to a corporate- level tax on any taxable disposition of SEUSA's pre-acquisition assets that occur within ten years after its August 1, 2007 acquisition, and any taxable disposition of HCR ManorCare's pre-acquisition assets that occur within ten years after its April 7, 2011 acquisition. The corporate-level tax associated with the disposition of assets acquired in connection with the SEUSA and HCR ManorCare acquisitions would be assessed only to the extent of the built-in gain that existed on the date of each acquisition, based on the fair market value of the assets on August 1, 2007, with respect to SEUSA, and April 7, 2011, with respect to HCR ManorCare. The Company does not expect to dispose of any assets included in either acquisition that would result in the imposition of a material tax liability. As a result, the Company has not recorded a deferred tax liability associated with this corporate-level tax. Gains from asset dispositions occurring more than 10 years after either acquisition will not be subject to this corporate-level tax. However, from time to time, the Company may dispose of SEUSA or HCR ManorCare assets before the applicable 10-year periods if it is able to effect a tax deferred exchange. In connection with the SEUSA and HCR ManorCare acquisitions, the Company assumed unrecognized tax benefits of $8 million and $2 million, respectively. During 2013, the Company had a decrease in unrecognized tax benefits of $0.9 million. The decrease was caused by the lapse in the statute of limitations for unrecognized tax benefits assumed in connection with the HCR ManorCare acquisition. During 2011, the Company had a net decrease in unrecognized tax benefits of $4.9 million. The decrease was caused by the reversal of the remaining $6.9 million in unrecognized tax benefits related to the SEUSA acquisition caused by SEUSA's settlement of federal and state tax audits for all years for which the unrecognized tax benefits had been accrued, net of a $2.0 million increase for unrecognized tax benefits assumed in connection with the HCR ManorCare acquisition. The unrecognized tax benefits balances at both December 31, 2013 and 2012 were related entirely to the Company's acquisition of HCR ManorCare. A reconciliation of the Company's beginning and ending unrecognized tax benefits follows (in thousands):
|  | Amount |
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Balance at January 1, 2011 |  | $ | 6,890 |
Additions based on prior years' tax positions |  |  | 1,783 |
Reductions based on prior years' tax positions |  |  | (6,890 | )
Additions based on 2011 tax positions |  |  | 194 |
Balance at December 31, 2011 |  |  | 1,977 |
Reductions based on prior years' tax positions |  |  | — |
Additions based on 2012 tax positions |  |  | — |
Balance at December 31, 2012 |  |  | 1,977 |
Reductions based on prior years' tax positions |  |  | (890 | )
Additions based on 2013 tax positions |  |  | — |
Balance at December 31, 2013 |  | $ | 1,087 |
The Company anticipates that the balance in unrecognized tax benefits will decrease over the next 12 months by approximately $0.9 million due to a lapse in the statute of limitations. For the years ended December 31, 2013 and 2012, the Company recorded insignificant net increases to interest expense associated with the unrecognized tax benefits. For the year ended December 31, 2011, the Company recorded a net reduction to interest expense of $1.1 million. The net reduction was due to the reversal of $1.3 million of interest expense associated with the SEUSA unrecognized tax benefits and an increase of $0.2 million associated with unrecognized tax benefits assumed in connection with the HCR ManorCare acquisition. The Company has agreements with the sellers of SEUSA and HCR ManorCare whereby any increases in taxes and associated interest and penalties related to years prior to each of these acquisitions will be the responsibility of the sellers. Similarly, any pre-acquisition tax refunds and associated interest income will be refunded to the sellers. There would be no effect on the Company's tax rate if the unrecognized tax benefits were to be recognized.

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 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 Reference 6: 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 + Details
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