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 (Unaudited):

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

	2015 Estimate			2014 Actual			2013 Actual
Net income	$	20,517		$	22,116		$	17,875
Straight-line rent adjustments		(971	)		(1,480	)		(1,025	)
Book gain on sale—(in excess of) less than tax gain		(530	)		10,522			1,391
Rent received in advance, net		(73	)		(180	)		691
Adjustments for above/below market leases		(581	)		(253	)		(144	)
Non-deductible portion of restricted stock expense		613			(149	)		357
Federal excise tax, non-deductible		174			302			45
Book depreciation in excess of tax depreciation		4,219			2,970			1,686
Property acquisition costs—capitalized for tax purposes		798			417			850
Impairment loss		—			1,093			62
Other adjustments		(317	)		26			(111	)

Federal taxable income	$	23,849		$	35,384		$	21,677

Reconciliation between Cash Dividends Paid and Dividends Paid Deduction (Unaudited):

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

	2015 Estimate			2014 Actual			2013 Actual
Dividends paid	$	26,179		$	24,117		$	21,999
Dividend reinvestment plan(a)		228			197			230

		26,407			24,314			22,229
Less: Spillover dividends designated to previous year		(18,177	)		(7,107	)		(7,659	)
Plus: Dividends designated from following year		15,619			18,177			7,107

Dividends paid deduction	$	23,849		$	35,384		$	21,677


(a)	Reflects the up to 5% discount on common stock purchased through the dividend reinvestment plan.