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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
17. | Income Taxes
The Company elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distribute at least 90% of its taxable income to its shareholders. 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 income tax on taxable income it distributes to its shareholders. As the Company distributed sufficient taxable income for each of the three years ended December 31, 2018, no U.S. federal income or excise taxes were incurred. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain foreign, state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income. In addition, the Company has a TRS that is subject to federal, state and local income taxes on any taxable income generated from its operational activity. In order to maintain its REIT status, the Company must meet certain income tests to ensure that its gross income consists of passive income and not income from the active conduct of a trade or business. The Company utilizes its TRS to the extent certain fee and other miscellaneous non-real estate-related income cannot be earned by the REIT. The tax cost basis of assets was $5.0 billion and $9.1 billion at December 31, 2018 and 2017, respectively. For the years ended December 31, 2018, 2017 and 2016, the Company recorded a net payment of $1.1 million, $0.7 million and $1.0 million, respectively, related to taxes. In 2015, in accordance with temporary legislation of the Puerto Rico Internal Revenue Code, the Company made a voluntary election to prepay taxes related to the built-in gains associated with the real estate assets in Puerto Rico and restructured the ownership of its then 14 assets in Puerto Rico. The net prepaid tax related to the restructuring was $16.8 million. In 2017, the Company sold two of the assets in Puerto Rico and released $1.4 million of the prepaid tax asset. In 2018 and 2017, the Company established a valuation allowance of $4.0 million and $10.8 million, respectively, on the remaining prepaid tax asset triggered by the change in asset hold-period assumptions related to its change in strategic direction for the Puerto Rico properties (Note 14). In 2018, these assets were assumed by RVI and the associated valuation allowance was written off since this attribute couldn’t be transferred to RVI. The following represents the combined activity of the Company’s TRS (in thousands):
|  | For the Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Book income before income taxes |  | $ | 1,872 |  |  | $ | 11,180 |  |  | $ | 9,953 |
Current |  | $ | (430 | ) |  | $ | 459 |  |  | $ | 17 |
Deferred |  |  | — |  |  |  | — |  |  |  | — |
Total income tax (benefit) expense |  | $ | (430 | ) |  | $ | 459 |  |  | $ | 17 |
The differences between total income tax expense and the amount computed by applying the statutory income tax rate to income before taxes with respect to its TRS activity were as follows (in thousands):
|  | For the Year Ended December 31, |
TRS |  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory Rate |  |  | 21 | % |  |  | 34 | % |  |  | 34 | %
Statutory rate applied to pre-tax income |  | $ | 393 |  |  | $ | 3,801 |  |  | $ | 3,384 |
State tax expense net of federal income tax |  |  | — |  |  |  | 254 |  |  |  | 498 |
Deferred tax expense net of federal income tax |  |  | — |  |  |  | 724 |  |  |  | — |
AMT benefit refund |  |  | (430 | ) |  |  | — |  |  |  | — |
Permanent items |  |  | — |  |  |  | (241 | ) |  |  | — |
Deferred tax impact of tax rate change(A) |  |  | 7,350 |  |  |  | 19,391 |  |  |  | — |
Valuation allowance decrease based on impact of tax rate change(A) |  |  | (7,350 | ) |  |  | (23,470 | ) |  |  | (4,039 | )
Valuation allowance decrease – other deferred |  |  | (672 | ) |  |  | — |  |  |  | — |
Other |  |  | 279 |  |  |  | — |  |  |  | 174 |
Total (benefit) expense |  | $ | (430 | ) |  | $ | 459 |  |  | $ | 17 |
Effective tax rate |  |  | (22.97 | %) |  |  | 4.11 | % |  |  | 0.17 | %
| (A) | For the year ended December 31, 2018, includes $7.4 million deferred tax impact of state tax rate change, and for the year ended December 31, 2017, includes $19.4 million deferred tax impact of federal tax rate change.
Deferred tax assets and liabilities of the Company’s TRS were as follows (in thousands):
| For the Year Ended December 31, |
| 2018 |  |  | 2017 |
Deferred tax assets(A) | $ | 29,857 |  |  | $ | 37,940 |
Deferred tax liabilities |  | (11 | ) |  |  | (72 | )
Valuation allowance |  | (29,846 | ) |  |  | (37,868 | )
Net deferred tax asset | $ | — |  |  | $ | — |
| (A) | At December 31, 2018, primarily attributable to $18.5 million of net operating losses and $7.0 million of book/tax differences in joint venture investments and $4.0 million of capital loss carryforward. The TRS net operating loss carryforwards will expire in varying amounts between the years 2024 and 2035.
Reconciliation of GAAP net income (loss) attributable to SITE Centers to taxable income is as follows (in thousands):
| For the Year Ended December 31, |
| 2018 |  |  | 2017 |  |  | 2016 |
GAAP net income (loss) attributable to SITE Centers | $ | 114,434 |  |  | $ | (241,685 | ) |  | $ | 60,012 |
Plus: Book depreciation and amortization(A) |  | 237,383 |  |  |  | 336,530 |  |  |  | 376,493 |
Less: Tax depreciation and amortization(A) |  | (179,197 | ) |  |  | (214,298 | ) |  |  | (224,766 | )
Book/tax differences on losses from capital transactions |  | (161,452 | ) |  |  | (195,294 | ) |  |  | (155,170 | )
Joint venture equity in loss (earnings), net(A) |  | 40,682 |  |  |  | (9,537 | ) |  |  | (3,802 | )
Deferred income |  | (8,436 | ) |  |  | (26,032 | ) |  |  | (8,352 | )
Compensation expense |  | 3,259 |  |  |  | 4,093 |  |  |  | (5,237 | )
Impairment charges |  | 80,746 |  |  |  | 406,580 |  |  |  | 110,906 |
Puerto Rico tax prepayment |  | 3,991 |  |  |  | 12,237 |  |  |  | — |
RVI transaction costs |  | 36,177 |  |  |  | — |  |  |  | — |
Miscellaneous book/tax differences, net |  | 17,242 |  |  |  | 8,409 |  |  |  | (2,625 | )
Taxable income before adjustments |  | 184,829 |  |  |  | 81,003 |  |  |  | 147,459 |
Less: Capital gains |  | — |  |  |  | — |  |  |  | — |
Taxable income subject to the 90% dividend requirement | $ | 184,829 |  |  | $ | 81,003 |  |  | $ | 147,459 |
| (A) | Depreciation expense from majority-owned subsidiaries and affiliates, which is consolidated for financial reporting purposes but not for tax reporting purposes, is included in the reconciliation item “Joint venture equity in earnings, net.”
Reconciliation between cash and stock dividends paid and the dividends paid deduction is as follows (in thousands):
| For the Year Ended December 31, |
| 2018 |  |  | 2017 |  |  | 2016 |
Cash Dividends paid | $ | 280,714 |  |  | $ | 304,973 |  |  | $ | 293,031 |
Stock Dividend due to RVI spin-off |  | 593,659 |  |  | — |  |  | — |
Total Dividends |  | 874,373 |  |  |  | 304,973 |  |  |  | 293,031 |
Less: Dividends designated to prior year |  | (8,383 | ) |  |  | (5,594 | ) |  |  | (5,594 | )
Plus: Dividends designated from the following year |  | 8,383 |  |  |  | 8,383 |  |  |  | 5,594 |
Less: Return of capital |  | (689,544 | ) |  |  | (226,759 | ) |  |  | (145,572 | )
Dividends paid deduction | $ | 184,829 |  |  | $ | 81,003 |  |  | $ | 147,459 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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