NOTE 13—INCOME TAXES

The Company elected to be taxed as a REIT under the Internal Revenue Code, commencing with its taxable year ended December 31, 1983. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to its stockholders. It is management's current intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal, state and local income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal, state and local income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.

Reconciliation between Financial Statement Net Income and Federal Taxable Income:

The following unaudited table reconciles financial statement net income to federal taxable income for the years indicated (amounts in thousands):

	2012 Estimate			2011 Actual			2010 Actual

Net income	$	32,320		$	13,724		$	9,306
Straight line rent adjustments		(1,354	)		(1,419	)		(693	)
Financial statement gain on sale in excess of tax gain		(315	)		61			557
Rent received in advance, net		111			(78	)		205
Financial statement adjustment for above/below market leases		2			31			(442	)
Non-deductible portion of restricted stock expense		341			300			249
Federal excise tax, non-deductible		290			—			—
Financial statement depreciation in excess of tax depreciation		1,021			1,042			1,051
Property acquisition costs—capitalize for tax purposes		823			268			1,010
Other adjustments		(68	)		(516	)		542

Federal taxable income	$	33,171		$	13,413		$	11,785

Reconciliation between Cash Dividends Paid and Dividends Paid Deduction:

The following unaudited table reconciles cash dividends paid with the dividends paid deduction for the years indicated (amounts in thousands):

	2012 Estimate		2011 Actual			2010 Actual

Dividends paid	$	24,255	$	14,758		$	14,123
Dividend reinvestment plan(a)		256		153			108

		24,511		14,911			14,231
Less: Spillover dividends designated to previous year		—		(1,448	)		(3,844	)
Plus: Dividends designated from following year		8,710		—			1,448

Dividends paid deduction(b)	$	33,221	$	13,463		$	11,835

(a): Amount reflects the 5% discount on common stock purchased through the dividend reinvestment plan.
(b): Dividends paid deduction is slightly higher than federal taxable income in 2012, 2011 and 2010 to account for adjustments made to federal taxable income as a result of the impact of the alternative minimum tax.