REGENCY CENTERS CORP

Income Taxes

The Company has elected to be taxed as a REIT under the applicable provisions of the Code with certain of its subsidiaries treated as TRS entities, which are subject to federal and state income taxes.

The following table summarizes the tax status of dividends paid on our common shares:



	Year ended December 31,
(in thousands)	2017	2016	2015
Dividend per share	$2.10	2.00	1.94
Ordinary income	86%	53%	71%
Capital gain	10%	8%	5%
Return of capital	4%	39%	19%
Qualified dividend income	—%	—%	5%

Our consolidated expense (benefit) for income taxes for the years ended December 31, 2017, 2016, and 2015 was as follows:



	Year ended December 31,
(in thousands)	2017			2016		2015
Income tax (benefit) expense:
Current	$	1,168		(153	)	(1,604	)
Deferred	(10,815		)	—		—
Total income tax (benefit) expense ⁽¹⁾	$	(9,647	)	(153	)	(1,604	)

⁽¹⁾ Includes $90 thousand of tax expense presented within Other operating expenses during the year ended December 31, 2017, and $153 thousand and $1.6 million of tax benefit presented within Gain on sale of real estate, net of tax, during the years ended December 31, 2016 and 2015, respectively.

The income tax benefit for the year ended December 31, 2017 was primarily due to the income tax benefit from revaluing the net deferred tax liability at a TRS entity acquired through the Equity One merger, as a result of the change in corporate tax rates from the 2017 Tax Cuts and Jobs Act.

The TRS entities are subject to federal and state income taxes and file separate tax returns. Income tax (benefit) expense differed from the amounts computed by applying the U.S. Federal income tax rate to pretax income of the TRS entities, as follows:



	Year ended December 31,
(in thousands)	2017			2016		2015
Computed expected tax expense (benefit)	$	1,190		933		1,730
State income tax, net of federal benefit	108			56		224
Valuation allowance	(1,512		)	(1,239	)	(3,556	)
Tax rate change	(9,737		)	—		—
All other items	304			97		(2	)
Total income tax benefit ⁽¹⁾	(9,647		)	(153	)	(1,604	)
Income tax benefit attributable to operations ⁽¹⁾	$	(9,647	)	(153	)	(1,604	)
⁽¹⁾ Includes $90 thousand of tax expense presented within Other operating expenses during the year ended December 31, 2017, and $153 thousand and $1.6 million of tax benefit presented within Gain on sale of real estate, net of tax, during the years ended December 31, 2016 and 2015, respectively.

The tax effects of temporary differences and carryforwards (included in Accounts payable and other liabilities in the accompanying Consolidated Balance Sheets) are summarized as follows:



	December 31,
(in thousands)	2017			2016
Deferred tax assets
Investments in real estate partnerships	$	—		361
Provision for impairment	3,785			5,827
Deferred interest expense	2,754			2,714
Capitalized costs under Section 263A	729			1,145
Net operating loss carryforward	373			—
Employee benefits	—			44
Other	2,297			3,059
Deferred tax assets	9,938			13,150
Valuation allowance	(8,300		)	(12,507	)
Deferred tax assets, net	1,638			643
Deferred tax liabilities
Straight line rent	(528		)	643
Fixed assets	(19,757		)	—
Other	(7		)	—
Deferred tax liabilities	(20,292		)	643
Net deferred tax liabilities	$	(18,654	)	—

The net deferred tax liability increased during 2017 primarily due to the acquisition of a net deferred tax liability, from the basis difference of its real estate assets, at one TRS acquired as part of the Equity One merger, as discussed in note 2.

Due to uncertainty regarding the realization of certain deferred tax assets, the Company previously established valuation allowances, primarily in connection with the deferred interest and NOL carryforwards related to certain TRSs. As of December 31, 2017, the minimal projected future taxable income and unpredictable nature of potential property sales with built in losses support the conclusion that it is still more likely than not that some of the deferred tax assets will not be realized.