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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes |
Income Taxes | NOTE 18. Income Taxes The Company has elected to be taxed as a REIT under the applicable provisions of the Code for every year beginning with the year ended December 31, 1985. The Company has also elected for certain of its subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”) which are subject to federal and state income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this Note 18. Certain REIT entities are also subject to state, local and foreign income taxes. The TRS entities subject to tax reported losses before income taxes from continuing operations of $9 million, $22 million and $2 million for the years ended December 31, 2016, 2015 and 2014, respectively. The REIT’s losses from continuing operations before income taxes from the U.K. were $4 million, $15 million and $4 million for the years ended December 31, 2016, 2015 and 2014, respectively. The total income tax expense (benefit) from continuing operations consists of the following components (in thousands):
|  | Year Ended December 31, |
|  | 2016 |  | 2015 |  | 2014 |
Current |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,525 |  | $ | 4,948 |  | $ | 1,833 |
State |  |  | 8,307 |  |  | 1,988 |  |  | 2,018 |
Foreign |  |  | 1,332 |  |  | 828 |  |  | 223 |
Total current |  | $ | 18,164 |  | $ | 7,764 |  | $ | 4,074 |
Deferred |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (10,241) |  | $ | (11,317) |  | $ | (3,278) |
State |  |  | (1,401) |  |  | (1,382) |  |  | (347) |
Foreign |  |  | (2,049) |  |  | (4,872) |  |  | (955) |
Total deferred |  | $ | (13,691) |  | $ | (17,571) |  | $ | (4,580) |
Total income tax expense (benefit) |  | $ | 4,473 |  | $ | (9,807) |  | $ | (506) |
The Company’s income tax expense from discontinued operations was $48 million, $1 million and $1 million for the years ended December 31, 2016, 2015 and 2014, respectively (see Note 5). The following table reconciles the income tax expense (benefit) from continuing operations at statutory rates to the actual income tax expense recorded (in thousands):
|  | Year Ended December 31, |
|  | 2016 |  | 2015 |  | 2014 |
Tax benefit at U.S. federal statutory income tax rate on income or loss subject to tax |  | $ | (4,581) |  | $ | (12,630) |  | $ | (2,131) |
State income tax expense, net of federal tax |  |  | 6,081 |  |  | (606) |  |  | 134 |
Gross receipts and margin taxes |  |  | 1,847 |  |  | 1,383 |  |  | 1,573 |
Foreign rate differential |  |  | 647 |  |  | 2,269 |  |  | 554 |
Effect of permanent differences |  |  | (280) |  |  | (298) |  |  | (196) |
Return to provision adjustments |  |  | 287 |  |  | (368) |  |  | (528) |
Increase in valuation allowance |  |  | 472 |  |  | 443 |  |  | 88 |
Total income tax expense (benefit) |  | $ | 4,473 |  | $ | (9,807) |  | $ | (506) |
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table summarizes the significant components of the Company’s deferred tax assets and liabilities from continuing operations (in thousands):
|  | December 31, |
|  | 2016 |  | 2015 |  | 2014 |
Property, primarily differences in depreciation and amortization, the basis of land, and the treatment of interest and certain costs |  | $ | 28,940 |  | $ | 19,862 |  | $ | 3,418 |
Net operating loss carryforward |  |  | 8,784 |  |  | 3,703 |  |  | 484 |
Expense accruals and other |  |  | (847) |  |  | (753) |  |  | 462 |
Valuation allowance |  |  | (606) |  |  | (531) |  |  | (88) |
Net deferred tax assets |  | $ | 36,271 |  | $ | 22,281 |  | $ | 4,276 |
Deferred tax assets and liabilities are included in other assets, net and accounts payable and accrued liabilities. At December 31, 2016 the Company had a net operating loss (“NOL”) carryforward of $24 million related to the TRS entities. These amounts can be used to offset future taxable income, if any. The NOL carryforwards begin to expire in 2033 with respect to the TRS entities. The Company records a valuation allowance against deferred tax assets in certain jurisdictions when it cannot sustain a conclusion that it is more likely than not that it can realize the deferred tax assets during the periods in which these temporary differences become deductible. The deferred tax asset valuation allowance is adequate to reduce the total deferred tax assets to an amount that the Company estimates will “more-likely-than-not” be realized. 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 2013. For the year ended December 31, 2016, the tax basis of the Company’s net assets was less than the reported amounts by $2.0 billion. The difference between the reported amounts and the tax basis was primarily related to the Slough Estates USA, Inc. (“SEUSA”) acquisition, which occurred in 2007. For each of the years ended December 31, 2015 and 2014, the tax basis of the Company’s net assets was less than the reported amounts by $6.5 billion. The difference between the reported amounts and the tax basis was primarily related to the SEUSA and HCRMC acquisitions which occurred in 2007 and 2011, respectively. Both SEUSA and HCRMC 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 HCRMC, including the tax basis in the acquired company’s assets and liabilities. The Company is no longer subject to federal corporate-level tax on the taxable disposition of SEUSA pre-acquisition assets. However, the Company may be subject to corporate-level tax in some states on any taxable disposition that occurs within ten years after the August 1, 2007 acquisition, only to the extent of the built-in gain that existed on the date of the acquisition, based on the fair market value of the assets. In connection with the HCRMC acquisition, the Company assumed unrecognized tax benefits of $2 million. For the year ended December 31, 2014, the Company had a decrease in unrecognized tax benefits of $1 million. There were no unrecognized tax benefits balances at December 31, 2016 and 2015. During the year ended December 31, 2014, the Company reversed the entire balance of the interest expense associated with the unrecognized tax benefits assumed in connection with the acquisition of HCRMC. The amount reversed was insignificant and it was due to the lapse in the statute of limitations.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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