Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.21.2
Income Taxes
 9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company's deferred tax assets and liabilities as of September 30, 2021 and December 31, 2020, are as follows:
Deferred Tax Assets and Liabilities
September 30, 2021 December 31, 2020
Deferred Tax Assets:
Deferred contract revenue $ 1,368,875  $ 1,474,962 
Net operating loss carryforwards 6,806,350  6,438,628 
Capital loss carryforward 92,418  92,418 
Other 420  420 
Sub-total $ 8,268,063  $ 8,006,428 
Valuation allowance (92,418) (92,418)
Sub-total $ 8,175,645  $ 7,914,010 
Deferred Tax Liabilities:
Cost recovery of leased and fixed assets $ (4,048,968) $ (3,578,283)
Other (66,438) (53,151)
Sub-total $ (4,115,406) $ (3,631,434)
Total net deferred tax asset $ 4,060,239  $ 4,282,576 
As of September 30, 2021, the total deferred tax assets and liabilities presented above relate to the Company's TRSs. The Company recognizes the tax benefits of uncertain tax positions only when the position is "more likely than not" to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company's policy is to record interest and penalties on uncertain tax positions as part of tax expense. Tax years beginning with the year ended December 31, 2017 remain open to examination by federal and state tax authorities.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss ("NOL") carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs originating in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Certain of the Company’s TRSs have NOLs totaling approximately $1.2 million that are eligible for carryback under the CARES Act. The benefit of these carrybacks has been recorded as an increase to income taxes receivable and a reduction to deferred tax assets as of December 31, 2020. Certain NOLs which were initially measured at the current corporate income tax rate of 21 percent are being carried back to offset taxable income that was taxed at a pre-Tax Cuts and Jobs Act of 2017 rate of 34 percent. The benefit received from the rate differential was reflected in the income tax provision for the year ended December 31, 2020.
For the year ended December 31, 2019, the Company generated a capital loss carryforward resulting from the liquidation of Lightfoot. The capital loss decreased upon receipt of the final 2019 K-1's in the first quarter of 2020. The amount of the carryforward for tax purposes was approximately $440 thousand as of both September 30, 2021 and December 31, 2020, respectively, and if not utilized, this carryforward will expire as of December 31, 2024. Management assessed the available evidence and determined that it is more likely than not that the capital loss carryforward will not be utilized prior to expiration. Due to the uncertainty of realizing this deferred tax asset, a valuation allowance of $92 thousand was recorded equal to the amount of the tax benefit of this carryforward at both September 30, 2021 and December 31, 2020, respectively. In the future, if the Company concludes, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, the valuation allowance will be adjusted accordingly in the period such conclusion is made.
Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 21 percent for the three and nine months ended September 30, 2021 and 2020 to income (loss) from operations and other income and expense for the periods presented, as follows:                                                                                        
Income Tax Expense (Benefit)
For the Three Months Ended For the Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Application of federal statutory income tax rate $ 620,788  $ (838,829) $ (1,908,472) $ (63,749,653)
State income taxes, net of federal tax expense 18,817  (9,494) 47,398  15,717 
Federal Tax Attributable to Income of Real Estate Investment Trust (524,193) 773,927  2,144,846  63,720,129 
Other (8,823) (932) (20,120) (160,070)
Total income tax expense (benefit) $ 106,589  $ (75,328) $ 263,652  $ (173,877)
The components of income tax expense (benefit) include the following for the periods presented:
Components of Income Tax Expense (Benefit)
For the Three Months Ended For the Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Current tax expense (benefit)
Federal $ (6,927) $ (2,431) $ 31,470  $ (414,505)
State (net of federal tax expense (benefit)) —  —  9,843  15,000 
Total current tax expense (benefit) $ (6,927) $ (2,431) $ 41,313  $ (399,505)
Deferred tax expense (benefit)
Federal $ 94,699  $ (63,403) $ 184,784  $ 224,911 
State (net of federal tax expense (benefit)) 18,817  (9,494) 37,555  717 
Total deferred tax expense (benefit) $ 113,516  $ (72,897) $ 222,339  $ 225,628 
Total income tax expense (benefit), net $ 106,589  $ (75,328) $ 263,652  $ (173,877)