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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES
10. INCOME TAXES
General—We have elected to be taxed as a REIT under the IRC. To qualify as a REIT, we must meet a number of organization and operational requirements, including a requirement to annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. We intend to continue to adhere to these requirements and to maintain our REIT status. As a REIT, we are entitled to a deduction for some or all of the distributions we pay to our stockholders. Accordingly, we are generally subject to U.S. federal income taxes on any taxable income that is not currently distributed to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income taxes and may not be able to qualify as a REIT until the fifth taxable year following the year of disqualification.                                
Notwithstanding our qualification as a REIT, we may be subject to certain state and local taxes on our income or properties. In addition, our consolidated financial statements include the operations of certain wholly-owned entities that have jointly elected to be treated as TRS entities and are subject to U.S. federal, state, and local incomes taxes at regular corporate tax rates. As a REIT, we may also be subject to certain U.S. federal excise taxes if we engage in certain types of transactions.
Income tax benefits from uncertain tax positions are recognized in the consolidated financial statements only if we believe it is more likely than not that the uncertain tax position will be sustained based solely on the technical merits of the tax position and consideration of the relevant taxing authority's widely understood administrative practices and precedents. We do not believe that we have any uncertain tax positions at December 31, 2021 and 2020.
The statute of limitations for the federal income tax returns remain open for the 2018 through 2020 tax years. The statute of limitations for state income tax returns remain open in accordance with each state's statute.
Our accounting policy is to classify interest and penalties as a component of income tax expense. We accrued no interest or penalties as of December 31, 2021 and 2020.
Deferred Tax Assets and Liabilities—Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which these temporary differences are expected to reverse. Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversal of existing taxable temporary differences, the magnitude and timing of future projected taxable income, and tax planning strategies. We believe, based on available evidence, it is not more likely than not that our net deferred tax assets will be realized in future periods and, therefore, have recorded a valuation allowance equal to the net deferred tax asset balance.    
The following is a summary of our deferred tax assets and liabilities as of December 31, 2021 and 2020 (in thousands):
  20212020
Deferred tax assets:
Accrued compensation$3,875 $3,250 
Accrued expenses and reserves124 89 
Net operating loss (“NOL”) carryforward2,404 2,787 
Other309 306 
Gross deferred tax asset6,712 6,432 
Less: valuation allowance(3,050)(3,183)
Total deferred tax asset3,662 3,249 
Deferred tax liabilities:
Real estate assets and other capitalized assets(3,594)(3,236)
Other(68)(13)
Total deferred tax liabilities(3,662)(3,249)
Net deferred tax asset$— $— 
Our deferred tax assets and liabilities result from the activities of our TRS entities. The TRS entities have a federal NOL carryforward of approximately $10.4 million. The federal NOL carryforward can be carried forward indefinitely. As of December 31, 2021, the TRS entities have state NOL carryforwards of approximately $4.7 million, which will expire as determined under each state's statute.    
Differences between the net income or loss presented on the consolidated statements of operations and taxable income are primarily related to the timing of the recognition of gain on the sale of investment properties for financial reporting purposes and tax reporting, the recognition of impairment expense for financial reporting purposes which is not deductible for tax reporting purposes, and differences in recognition of rental income and depreciation and amortization expense for both financial reporting and tax reporting.
Distributions—The following table reconciles Net Income (Loss) Attributable to Stockholders to REIT taxable income before the dividends paid deduction for the years ended December 31, 2021, 2020, and 2019 (in thousands):
  202120202019
Net income (loss) attributable to stockholders$15,121 $4,772 $(63,532)
Net (income) loss from TRS(533)(702)5,346 
Net income (loss) attributable to REIT operations14,588 4,070 (58,186)
Book/tax differences69,943 63,846 153,047 
REIT taxable income84,531 67,916 94,861 
Less: Capital gains(19,765)— (16,353)
REIT taxable income subject to 90% dividend requirement$64,766 $67,916 $78,508 
Total gross distributions to our stockholders exceeded 100% of REIT taxable income for the years ended December 31, 2021 and 2019. Total gross distributions to our stockholders for the year ended December 31, 2020 were approximately $64.7 million. As permitted under the IRC, we utilized approximately $3.2 million of our January 2021 distribution to offset our 2020 REIT taxable income.
The tax characterization of our distributions declared for the years ended December 31, 2021, 2020, and 2019 was as follows:
202120202019
Common stock:
Ordinary dividends62.8 %100.0 %38.0 %
Non-dividend distributions18.1 %— %53.4 %
Capital gain distributions(1)
19.1 %— %8.6 %
Total distributions per share of common stock100.0 %100.0 %100.0 %
(1)Pursuant to U.S. Treasury Regulation §1.1061-6(c) and §1061 of the IRC, the One Year Amounts and Three Year Amounts disclosures are both zero with respect to direct and indirect holders of “applicable partnership interests” for us and our subsidiary REIT, Phillips Edison Institutional REIT, LLC.