6. Income Taxes

We have maintained and intend to maintain our election as a REIT under the Internal Revenue Code of 1986, as amended. In order for us to continue to qualify as a REIT we must meet a number of organizational and operational requirements, including a requirement to distribute annual dividends to our shareholders equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level to the extent such income is distributed to our shareholders annually. If our taxable income exceeds our dividends in a tax year, REIT tax rules allow us to designate dividends from the subsequent tax year in order to avoid current taxation on undistributed income. If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income taxes at regular corporate rates, including any applicable alternative minimum tax. In addition, we may not be able to requalify as a REIT for the four subsequent taxable years. We historically have incurred only state and local income, franchise, and excise taxes. Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to applicable federal, state, and local income and margin taxes. Our operating partnerships are flow-through entities and are not subject to federal income taxes at the entity level.

We have provided for income, franchise, and margin taxes in the consolidated statements of income (loss) and comprehensive income for the years ended December 31, 2011, 2010 and 2009. Income taxes for the year ended December 31, 2011 included approximately $1.0 million associated with the gain recognized by one of our taxable REIT subsidiaries on the sale of an available-for-sale investment in February 2011. Other income tax expense is related to entity level taxes on certain ventures, state taxes, and federal taxes on certain of our taxable REIT subsidiaries. We have no significant temporary differences or tax credits associated with our taxable REIT subsidiaries.

The following table reconciles net income to REIT taxable income for the years ended December 31:

		September 30,			September 30,			September 30,
	Year Ended December 31,
(in thousands)	2011			2010			2009
Net income (loss)	$	59,961		$	31,142		$	(44,203	)
Less (income) loss attributable to noncontrolling interests		(3,582	)		(926	)		403
Less income allocated to perpetual preferred units		(7,000	)		(7,000	)		(7,000	)

Net income (loss) attributable to common shareholders		49,379			23,216			(50,800	)
Loss of taxable REIT subsidiaries included above		539			2,056			25,124

Net income (loss) from REIT operations		49,918			25,272			(25,676	)
Book depreciation and amortization, including discontinued operations		188,042			179,662			178,607
Tax depreciation and amortization		(155,636	)		(158,134	)		(164,639	)
Book/tax difference on gains/losses from capital transactions		(4,315	)		37,798			(7,059	)
Book/tax difference on impairment associated with land development activities		—			—			62,397
Other book/tax differences, net		8,205			(10,565	)		(24,188	)

REIT taxable income		86,214			74,033			19,442
Dividends paid deduction		(143,657	)		(124,999	)		(128,507	)

Dividends paid in excess of taxable income	$	(57,443	)	$	(50,966	)	$	(109,065	)

A schedule of per share distributions we paid and reported to our shareholders is set forth in the following table:

		September 30,			September 30,			September 30,
	Year Ended December 31,
	2011			2010			2009
Common Share Distributions
Ordinary income	$	1.08		$	0.89		$	1.74
Long-term capital gain		0.13			0.20			0.25
Unrecaptured Sec. 1250 gain		0.23			0.48			0.06
Return of capital		0.52			0.23			—

Total	$	1.96		$	1.80		$	2.05


Percentage of distributions representing tax preference items		2.83	%		3.91	%		3.94	%

We have taxable REIT subsidiaries which are subject to federal and state income taxes. At December 31, 2011, our taxable REIT subsidiaries had net operating loss carryforwards ("NOL's") of approximately $29.0 million which expire in years 2019 to 2031. Because NOL's are subject to certain change of ownership, continuity of business, and separate return year limitations, and because it is unlikely the available NOL's will be utilized or because we consider any amounts possibly utilized to be immaterial, no benefits of these NOL's have been recognized in our consolidated financial statements.

The carrying value of net assets reported in our consolidated financial statements at December 31, 2011 exceeded the tax basis by approximately $972.8 million.

Income Tax Expense – Current. For the tax years ended December 31, 2011, 2010, and 2009, we had current income tax expense of approximately $2.2 million, $1.6 million, and $1.0 million, respectively. Income tax expense for the year ended December 31, 2011 included approximately $1.0 million associated with the gain recognized by one of our taxable REIT subsidiaries on the sale of an available-for-sale investment during 2011 and also were comprised of entity level state income taxes on certain ventures and federal income tax related to another one of our taxable REIT subsidiaries. The 2010 income tax expense was comprised mainly of entity level state income taxes on certain ventures and federal income tax related to one of our taxable REIT subsidiaries. The 2009 income tax expense was comprised mainly of state income taxes.

Income Tax Expense – Deferred. For the years ended December 31, 2011, 2010, and 2009, our deferred tax expense was not significant.

The company and its subsidiaries' income tax returns are subject to examination by federal, state and local tax jurisdictions for years 2008 through 2010. Net income tax loss carry forwards and other tax attributes generated in years prior to 2008 are also subject to challenge in any examination of those tax years. The company and its subsidiaries are not under any notice of audit from any taxing authority at year end 2011. We believe we have no uncertain tax positions or unrecognized tax benefits requiring disclosure for the periods presented.