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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | 10. Income Taxes The components of income tax (provision) benefit for the years ended December 31, 2012, 2011 and 2010 are comprised of the following:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (5,210 | ) |  | $ | (622 | ) |  | $ | (893 | )
State |  |  | (253 | ) |  |  | (502 | ) |  |  | (2,372 | )
Foreign |  |  | (10 | ) |  |  | (41 | ) |  |  | (95 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | (284 | ) |  |  | 163 |
State |  |  | (49 | ) |  |  | (2 | ) |  |  | 40 |
Foreign |  |  | — |  |  |  | (697 | ) |  |  | (148 | )
|  | $ | (5,522 | ) |  | $ | (2,148 | ) |  | $ | (3,305 | )
Deferred income taxes represent the tax effect of the temporary differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following as of December 31, 2012 and 2011:
|  | 2012 |  |  | 2011 |
Investments in Joint Ventures |  | $ | 11 |  |  | $ | 15 |
Prepaid Rent |  |  | 13 |  |  |  | 45 |
Restricted Stock |  |  | 5 |  |  |  | 43 |
Impairment of Real Estate |  |  | 5,519 |  |  |  | 5,683 |
Foreign Net Operating Loss Carryforward |  |  | 854 |  |  |  | 828 |
Valuation Allowance |  |  | (5,244 | ) |  |  | (5,078 | )
Other |  |  | 588 |  |  |  | 483 |
Total Deferred Tax Assets, Net of Allowance |  | $ | 1,746 |  |  | $ | 2,019 |
Straight-line Rent |  |  | (91 | ) |  |  | (85 | )
Fixed Assets |  |  | (1,666 | ) |  |  | (1,946 | )
Other |  |  | (158 | ) |  |  | (108 | )
Total Deferred Tax Liabilities |  | $ | (1,915 | ) |  | $ | (2,139 | )
Total Net Deferred Tax Liabilities |  | $ | (169 | ) |  | $ | (120 | )
A valuation allowance is recorded if we believe it is more likely than not that all or some portion of our deferred tax assets will not be realized. We do not have projections of future taxable income or other sources of taxable income in the taxable REIT subsidiaries significant enough to allow us to believe it is more likely than not that we will realize our deferred tax assets. Therefore, we have recorded a valuation allowance against our deferred tax assets. An increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax assets, is included in the current tax provision. As of December 31, 2012 and 2011, we had net deferred tax liabilities of $169 and $120, after valuation allowances of $5,244 and $5,078, respectively. As of December 31, 2011 and 2010, we had net deferred tax (liabilities) assets of $(120) and $863, after valuation allowances of $5,078 and $9,301, respectively. The decrease in the valuation allowance of $4,223 from December 31, 2010 to December 31, 2011 is primarily related to a decrease in net deferred tax assets and liabilities due to the sales of property. The income tax provision pertaining to income from continuing operations and gain on sale of real estate differs from the amounts computed by applying the applicable federal statutory rate as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Tax Benefit (Provision) at Federal Rate Related to Continuing Operations |  | $ | 557 |  |  | $ | (2,162 | ) |  | $ | 5,141 |
State Tax Provision, Net of Federal Benefit (Provision) |  |  | (244 | ) |  |  | (521 | ) |  |  | (2,320 | )
Non-deductible Permanent Items, Net |  |  | 32 |  |  |  | (54 | ) |  |  | (58 | )
IRS Audit Adjustment and Accrued Interest |  |  | (5,523 | ) |  |  | — |  |  |  | — |
Change in Valuation Allowance |  |  | (166 | ) |  |  | 1,853 |  |  |  | (6,108 | )
Foreign Taxes, Net |  |  | (10 | ) |  |  | (96 | ) |  |  | (211 | )
Other |  |  | (168 | ) |  |  | 78 |  |  |  | 251 |
Net Income Tax Provision |  | $ | (5,522 | ) |  | $ | (902 | ) |  | $ | (3,305 | )
We evaluate tax positions taken in the financial statements on a quarterly basis under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, we may recognize a tax benefit from an uncertain tax position only if it is “more-likely-than-not” that the tax position will be sustained on examination by taxing authorities. As of December 31, 2012, we do not have any unrecognized tax benefits. We file income tax returns in the U.S., and various states and foreign jurisdictions. In general, the statutes of limitations for income tax returns remain open for the years 2009 through 2012. One of our taxable REIT subsidiaries which liquidated in September 2009 is currently under examination by the Internal Revenue Service (“IRS”) for 2008 and for the tax year ended September 1, 2009. IRS Tax Settlement On August 24, 2009, we received a private letter ruling from the IRS granting favorable loss treatment under Sections 331 and 336 of the Code on the tax liquidation of one of our former taxable REIT subsidiaries. On November 6, 2009, legislation was signed that allowed businesses with net operating losses for 2008 or 2009 to carry back those losses for up to five years. As a result, we received a refund from the IRS of $40,418 in the fourth quarter of 2009 (the “Refund”) in connection with this tax liquidation. As previously reported, the IRS examination team, which is required by statute to review all refund claims in excess of $2,000 on behalf of the Joint Committee on Taxation, indicated to us that it disagreed with certain of the property valuations we obtained from an independent valuation expert in support of our fair value of the liquidated taxable REIT subsidiary and our claim for the Refund. We have reached an agreement with the regional office of the IRS on a proposed adjustment to the Refund. The total agreed-upon adjustment to taxable income is approximately $13,700, which equates to approximately $4,806 of taxes owed. We must also pay accrued interest which was approximately $542 as of December 31, 2012. During the year ended December 31, 2012, the Company recorded a charge of $5,348 related to the agreed-upon adjustment which is reflected as a component of income tax expense. The settlement amount is subject to final review and approval by the Joint Committee on Taxation. There can be no assurance that the settlement amount will be approved at the level we currently anticipate, nor can we provide an estimate of the timing of the final approval. In addition, we are currently in discussions with the regional office of the IRS to determine the timing of the impact of the proposed tax settlement on the tax characterization of the distributions to the limited partners of the Operating Partnership and the stockholders of the Company which is likely to result in additional capital gain income being allocable to the limited partners of the Operating Partnership and the stockholders of the Company. Michigan Tax Issue As of December 31, 2008, we had paid approximately $1,400 (representing tax and interest for the years 1997-2000) to the State of Michigan regarding business loss carryforwards the appropriateness of which was the subject of litigation initiated by us. On December 11, 2007, the Michigan Court of Claims rendered a decision against us regarding the business loss carryforwards. Also, the court ruled against us on an alternative position involving Michigan’s Capital Acquisition Deduction. We filed an appeal to the Michigan Appeals Court in January 2008; however, as a result of the lower court’s decision, an additional approximately $800 (representing tax and interest for the year 2001) had been accrued through June 30, 2009 for both tax and financial statement purposes. On August 18, 2009, the Michigan Appeals Court issued a decision in our favor on the business loss carryforward issue. The Michigan Department of Treasury appealed the decision to the Michigan Supreme Court on September 29, 2009; however, we believed there was a very low probability that the Michigan Supreme Court would accept the case. Therefore, in September 2009 we reversed our accrual of $800 (related to the 2001 tax year) and set up a receivable of $1,400 for the amount paid in 2006 (related to the 1997-2000 tax years), resulting in an aggregate reversal of prior tax expense of approximately $2,200. On April 23, 2010, the Michigan Supreme Court reversed the decision of the Michigan Appeals Court and reinstated the decision of the Michigan Court of Claims. Based on the most recent ruling of the Michigan Supreme Court, we reversed the receivable of $1,400 and paid approximately $800, for a total of approximately $2,200 of tax expense for the year ended December 31, 2010, which is included in continuing operations. Federal Income Tax Treatment of Share Distributions For income tax purposes, distributions paid to common shareholders are classified as ordinary income, capital gain, return of capital or qualified dividends. We did not pay common share distributions for the years ended December 31, 2012, 2011 and 2010. For income tax purposes, distributions paid to preferred shareholders are classified as ordinary income, capital gain, return of capital or qualified dividends. For the years ended December 31, 2012, 2011 and 2010, the preferred distributions per depositary share were classified as follows:
Series J Preferred Stock |  | 2012 |  |  | As a Percentage of Distributions |  |  | 2011 |  |  | As a Percentage of Distributions |  |  | 2010 |  |  | As a Percentage of Distributions |
Ordinary Income |  | $ | — |  |  |  | 0.00 | % |  | $ | 0.3130 |  |  |  | 23.02 | % |  | $ | 1.4652 |  |  |  | 80.84 | %
Long-term Capital Gains |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | %
Unrecaptured Section 1250 Gain |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | % |  |  | 0.2423 |  |  |  | 13.37 | %
Return of Capital |  |  | 2.2657 |  |  |  | 100.00 | % |  |  | 1.0402 |  |  |  | 76.52 | % |  |  | — |  |  |  | 0.00 | %
Qualified Dividends |  |  | — |  |  |  | 0.00 | % |  |  | 0.0062 |  |  |  | 0.46 | % |  |  | 0.1050 |  |  |  | 5.79 | %
|  | $ | 2.2657 |  |  |  | 100.00 | % |  | $ | 1.3594 |  |  |  | 100.00 | % |  | $ | 1.8125 |  |  |  | 100.00 | %
Series J Preferred Stock – Depositary Shares Redeemed* |  | 2012 |  |  | As a Percentage of Distributions |
Ordinary Income |  | $ | — |  |  |  | 0.00 | %
Long-term Capital Gains |  |  | — |  |  |  | 0.00 | %
Unrecaptured Section 1250 Gain |  |  | — |  |  |  | 0.00 | %
Return of Capital |  |  | 2.2203 |  |  |  | 100.00 | %
Qualified Dividends |  |  | — |  |  |  | 0.00 | %
|  | $ | 2.2203 |  |  |  | 100.00 | %
* | Schedule relates to the 2,000,000 Depositary Shares of the Series J Preferred Stock that were redeemed on December 21, 2012. The 2012 redemption had no impact on the tables for 2011 or 2010.
Series K Preferred Stock |  | 2012 |  |  | As a Percentage of Distributions |  |  | 2011 |  |  | As a Percentage of Distributions |  |  | 2010 |  |  | As a Percentage of Distributions |
Ordinary Income |  | $ | — |  |  |  | 0.00 | % |  | $ | 0.3130 |  |  |  | 23.02 | % |  | $ | 1.4652 |  |  |  | 80.84 | %
Long-term Capital Gains |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | %
Unrecaptured Section 1250 Gain |  |  | — |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.00 | % |  |  | 0.2423 |  |  |  | 13.37 | %
Return of Capital |  |  | 2.2657 |  |  |  | 100.00 | % |  |  | 1.0402 |  |  |  | 76.52 | % |  |  | — |  |  |  | 0.00 | %
Qualified Dividends |  |  | — |  |  |  | 0.00 | % |  |  | 0.0062 |  |  |  | 0.46 | % |  |  | 0.1050 |  |  |  | 5.79 | %
|  | $ | 2.2657 |  |  |  | 100.00 | % |  | $ | 1.3594 |  |  |  | 100.00 | % |  | $ | 1.8125 |  |  |  | 100.00 | %
As discussed in the “IRS Tax Settlement” section, we are currently in discussions with the regional office of the IRS to determine the timing of the impact of the proposed tax settlement on the tax characterization of the distributions to the limited partners of the Operating Partnership and the stockholders of the Company which is likely to result in additional capital gain income being allocable to the limited partners of the Operating Partnership and the stockholders of the Company.

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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=6881521&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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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 7: 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 8: 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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