Income Taxes
We had a tax benefit of $84,439 and $1,733 for the years ended December 31, 2017 and 2016, respectively, and a tax provision of $16,539 for the year ended December 31, 2015.
Effective Tax Rate Reconciliation
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
U.S. federal statutory rate applied to income (loss) before income taxes | $ | 25,958 |
| | $ | 1,074 |
| | $ | (15,661 | ) |
Uncertain tax position resolution | 58,602 |
| | — |
| | — |
|
Benefit of tax credits | 2,902 |
| | 2,849 |
| | 2,574 |
|
State income taxes, net of federal benefit | 2,221 |
| | 1,621 |
| | (1,695 | ) |
Provision to return adjustments | 443 |
| | (910 | ) | | 199 |
|
Nondeductible executive compensation | — |
| | (841 | ) | | (1,499 | ) |
Other nondeductible expenses | (322 | ) | | (331 | ) | | (271 | ) |
Tax rate change | (6,356 | ) | | — |
| | — |
|
Other, net | 991 |
| | (1,729 | ) | | (186 | ) |
Total tax benefit (provision) | $ | 84,439 |
| | $ | 1,733 |
| | $ | (16,539 | ) |
In December 2017, the U.S. government enacted the Tax Cuts and Jobs Act, or the Tax Act, which, among other things, decreased the corporate statutory tax rate from 35% to 21%. We applied the effect of the Tax Act in 2017, the period in which the Tax Act was enacted. Passage of the Tax Act, among other things, required us to revalue our deferred tax assets and liabilities at the new statutory rate, which resulted in a decrease in our tax benefit of $6,356 for the year ended December 31, 2017. We will monitor future interpretations of the Tax Act as they develop and accordingly, our estimates may change.
Components of the Income Tax Benefit (Provision)
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Current tax benefit (provision) | |
| | |
| | |
|
Federal | $ | 32,883 |
| | $ | 2,101 |
| | $ | (6,513 | ) |
State | (5,575 | ) | | 3,974 |
| | (2,659 | ) |
Total current tax benefit (provision) | 27,308 |
| | 6,075 |
| | (9,172 | ) |
Deferred tax benefit (provision): | |
| | |
| | |
|
Federal | 48,139 |
| | (2,861 | ) | | (7,438 | ) |
State | 8,992 |
| | (1,481 | ) | | 71 |
|
Total deferred tax benefit (provision) | 57,131 |
| | (4,342 | ) | | (7,367 | ) |
Total tax benefit (provision) | $ | 84,439 |
| | $ | 1,733 |
| | $ | (16,539 | ) |
Components of Deferred Tax Assets and Liabilities
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
Deferred tax assets: | |
| | |
|
Straight line rent accrual | $ | 13,542 |
| | $ | 19,846 |
|
Reserves | 16,566 |
| | 24,575 |
|
Deferred gains | 32,949 |
| | 55,110 |
|
Asset retirement obligations | 2,765 |
| | 3,827 |
|
Tax credit carryforwards | 27,414 |
| | 10,331 |
|
Tax loss carryforwards | 61,961 |
| | 29,782 |
|
Deferred tenant improvements allowance | 11,228 |
| | 18,596 |
|
Other | 6,083 |
| | 10,699 |
|
Total deferred tax assets before valuation allowance | 172,508 |
| | 172,766 |
|
Valuation allowance | (1,027 | ) | | (600 | ) |
Total deferred tax assets | 171,481 |
| | 172,166 |
|
| | | |
Deferred tax liabilities: | |
| | |
|
Property and equipment | (120,297 | ) | | (176,117 | ) |
Goodwill and other intangible assets | (5,632 | ) | | (7,865 | ) |
Other | (1,466 | ) | | (1,050 | ) |
Total deferred tax liabilities | (127,395 | ) | | (185,032 | ) |
| | | |
Net deferred tax assets (liabilities) | $ | 44,086 |
| | $ | (12,866 | ) |
As of December 31, 2017, we had a valuation allowance of $1,027 related to federal capital loss and foreign credit carryforwards, state net operating losses and deferred tax assets in foreign jurisdictions due to the uncertainty of their realization. At December 31, 2017, we had carryforwards for federal net operating losses, state net operating losses and federal tax credits of $245,598, $173,082 and $27,414, respectively. Although not anticipated, $58,473 of the federal net operating losses is scheduled to expire in 2031 if unused. We anticipate $19 of the state net operating losses will expire in 2018, and the remainder to be utilized prior to expiration beginning in 2021. Federal tax credit carryforwards of $498 may expire between 2019 and 2025 if unused, with the remainder expected to be utilized prior to their expiration beginning in 2031.
The following table presents the classification in our consolidated balance sheets of the deferred tax assets and liabilities presented in the table above.
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
Net deferred tax amounts are included in: | | | |
Other noncurrent assets | $ | 44,086 |
| | $ | — |
|
Other noncurrent liabilities | — |
| | (12,866 | ) |
Uncertain Tax Positions
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Balance at beginning of period | $ | 59,742 |
| | $ | 59,742 |
| | $ | 59,557 |
|
Changes to current year tax positions | (1,140 | ) | | — |
| | — |
|
Interest | — |
| | — |
| | 185 |
|
Lapse in statute of limitations | (58,602 | ) | | — |
| | — |
|
Balance at end of period | $ | — |
| | $ | 59,742 |
| | $ | 59,742 |
|
Because of uncertainties concerning our value as of the date of an ownership change for federal income tax purposes that we experienced as a result of certain trading in our common shares during 2007, and as to the measurement of the net unrecognized built-in loss and allocation of the net unrecognized built-in loss, if any, to our various assets as of the date of the ownership change, we previously had not recognized certain of our tax attributes. In September 2017, as a result of a number of factors including the passage of time and the results of audits of certain of our U.S. federal income tax returns, the uncertainty related to the filing positions giving rise to these tax attributes was resolved and, accordingly, we recognized deferred tax assets related to those tax attributes and reversed a related accrued tax liability. The benefit for income taxes in our consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2017, includes $58,602 recognized in connection with the resolution of the previous uncertain tax positions.
Our U.S. federal income tax returns are subject to tax examinations for the years ended December 31, 2014 through 2017. Our state and Canadian income tax returns are generally subject to examination for the tax years ended December 31, 2013 through 2017. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted by the taxing authorities to the extent the carryforwards are utilized in a subsequent year.