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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
INCOME TAXES |
12. | INCOME TAXES
As discussed in Note 1, the Company operated in compliance with REIT requirements for federal income tax purposes from January 1, 2013 through December 31, 2020. During the years the Company elected REIT status, the Company was required to distribute at least 90% of its taxable income (including dividends paid to it by its TRSs) and did not pay federal income taxes on the amount distributed to its stockholders. In addition, the Company was required to meet a number of other organizational and operational requirements, which the Company continued to meet through the year ended December 31, 2020. Most states where CoreCivic holds investments in real estate conform to the federal rules recognizing REITs. Certain subsidiaries made an election with the Company to be treated as TRSs in conjunction with the Company's REIT election. The TRS elections permitted CoreCivic to engage in certain business activities in which the REIT could not engage directly. A TRS is subject to federal and state income taxes on the income from these activities and therefore, CoreCivic included a provision for taxes in its consolidated financial statements even during periods it operated as a REIT. On August 5, 2020, the Company announced that the BOD unanimously approved a plan to revoke its REIT election and become a taxable C Corporation, effective January 1, 2021. As a result, the Company is no longer required to operate under REIT rules, including the requirement to distribute at least 90% of its taxable income to its stockholders, which provides the Company with greater flexibility to use its free cash flow. Effective January 1, 2021, the Company is subject to federal and state income taxes on its taxable income at applicable tax rates, and is no longer entitled to a tax deduction for dividends paid. During the years in which the Company elected REIT status, CoreCivic was entitled to a deduction for dividends paid, resulting in a substantial reduction in the amount of the REIT's federal income tax expense. During those years, substantially all of CoreCivic's income tax expense was incurred based on the earnings generated by its TRSs. CoreCivic recorded an income tax expense of $138.0 million, $4.4 million, and $7.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. Income tax expense during 2021 included $114.2 million primarily resulting from the revaluation of the Company's net deferred tax liabilities due to the completion of all significant actions necessary to revoke its REIT election. Income tax expense during 2020 included $3.1 million that had been deferred during the construction period of the Lansing Correctional Facility, which was owned by a TRS of the Company until it converted to a qualified REIT subsidiary ("QRS") upon completion of construction in the first quarter of 2020. Because ownership of this facility reverts to the state of Kansas upon expiration of the twenty-year lease, the construction and subsequent lease of the facility to the State was a deemed sale for federal and state income tax purposes. The gain on sale was reported as a deferred tax asset based on the percentage of completion method over the construction period. This deferred tax asset was revalued to zero upon conversion of the TRS to a QRS. Income tax expense (benefit) is comprised of the following components (in thousands):
|  | For the Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 32,137 |  |  | $ | (1,928 | ) |  | $ | 5,324 |
State |  |  | 6,592 |  |  |  | 1,369 |  |  |  | 3,677 |
|  |  | 38,729 |  |  |  | (559 | ) |  |  | 9,001 |
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 86,703 |  |  |  | 3,878 |  |  |  | (489 | )
State |  |  | 12,567 |  |  |  | 1,067 |  |  |  | (673 | )
|  |  | 99,270 |  |  |  | 4,945 |  |  |  | (1,162 | )
Income tax expense |  | $ | 137,999 |  |  | $ | 4,386 |  |  | $ | 7,839 |
Significant components of CoreCivic's deferred tax assets and liabilities as of December 31, 2021 and 2020, are as follows (in thousands):
|  | December 31, |
|  | 2021 |  |  | 2020 |
Noncurrent deferred tax assets: |  |  |  |  |  |  |  |
Asset reserves and liabilities not yet deductible for tax |  | $ | 37,612 |  |  | $ | 21,482 |
Depreciation |  |  | 8,478 |  |  |  | 49 |
ROU lease assets |  |  | 41,440 |  |  |  | 530 |
Losses and tax credit carryforwards |  |  | 7,647 |  |  |  | 3,782 |
Intangible assets |  |  | 9,150 |  |  |  | 699 |
Other |  |  | 13,715 |  |  |  | 490 |
Total noncurrent deferred tax assets |  |  | 118,042 |  |  |  | 27,032 |
Less valuation allowance |  |  | (6,352 | ) |  |  | (848 | )
Total noncurrent deferred tax assets |  |  | 111,690 |  |  |  | 26,184 |
Noncurrent deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (149,189 | ) |  |  | (9,965 | )
Lease liabilities |  |  | (40,900 | ) |  |  | (520 | )
Intangible liabilities |  |  | (8,532 | ) |  |  | (2,149 | )
Other |  |  | (1,226 | ) |  |  | (2,437 | )
Total noncurrent deferred tax liabilities |  |  | (199,847 | ) |  |  | (15,071 | )
Net total noncurrent deferred tax assets (liabilities) |  | $ | (88,157 | ) |  | $ | 11,113 |
A reconciliation of the income tax provision at the statutory income tax rate and the effective tax rate as a percentage of income from continuing operations before income taxes for the years ended December 31, 2021, 2020, and 2019 is as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Statutory federal rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Revaluation of deferred tax liabilities |  |  | 132.7 |  |  |  | — |  |  |  | — |
Dividends paid deduction |  |  | — |  |  |  | (24.9 | ) |  |  | (18.9 | )
State taxes, net of federal tax benefit |  |  | 4.8 |  |  |  | 1.9 |  |  |  | 1.2 |
Permanent differences |  |  | 2.8 |  |  |  | 2.2 |  |  |  | 1.2 |
Deferred tax expense on Kansas lease structure |  |  | — |  |  |  | 5.2 |  |  |  | — |
Tax benefit of equity-based compensation |  |  | 2.6 |  |  |  | 1.1 |  |  |  | 0.1 |
Other items, net |  |  | (3.6 | ) |  |  | 0.8 |  |  |  | (0.6 | )
|  |  | 160.3 | % |  |  | 7.3 | % |  |  | 4.0 | %
CoreCivic's effective tax rate was 160.3%, 7.3%, and 4.0% during 2021, 2020, and 2019, respectively. During the years the Company elected REIT status, CoreCivic was entitled to a deduction for dividends paid, resulting in a substantial reduction in the amount of the REIT's federal income tax expense. Substantially all of CoreCivic's income tax expense during the years the Company elected REIT status was incurred based on the earnings generated by its TRSs. As of December 31, 2021, the Company’s tax attributes were offset by a valuation allowance totaling $6.4 million, which increased by $5.5 million from 2020. The valuation allowance against deferred tax assets is related to the Company’s investment in GRES and certain state tax credits. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The accelerated depreciation methods for qualified improvement property significantly reduced the Company's taxable income and, therefore, its distribution requirement as a REIT for 2020. During 2020, the Company deferred payment of $29.6 million of employer-side social security payments. Half of this deferred amount was paid in December 2021. The other half, amounting to $14.8 million, will be due December 31, 2022. The Company's consolidated effective tax rate could fluctuate in the future based on changes in estimates of taxable income, the implementation of additional tax planning strategies, changes in tax laws, changes in estimates related to uncertain tax positions, or changes in state apportionment factors, as well as changes in the valuation allowance applied to the Company's deferred tax assets that are based primarily on the amount of state net operating losses and tax credits that could expire unused. CoreCivic had no liabilities for uncertain tax positions as of December 31, 2021 and 2020. CoreCivic recognizes interest and penalties related to unrecognized tax positions in income tax expense. CoreCivic does not currently anticipate that the total amount of unrecognized tax positions will significantly change in the next twelve months. CoreCivic's U.S. federal income tax returns for tax years 2018 through 2020 remain subject to examination by the IRS. The majority of states in which CoreCivic files income tax returns follow the same statute of limitations as the federal government. Certain states in which CoreCivic files income tax returns have statutes that remain open from 2017.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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