Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 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 December 31, 2021 and 2020, are as follows:
Deferred Tax Assets and Liabilities
December 31, 2021 December 31, 2020
Deferred Tax Assets:
Deferred contract revenue $ 1,333,510  $ 1,474,962 
Net operating loss carryforwards 6,929,821  6,438,628 
Capital loss carryforward 92,418  92,418 
Other 366  420 
Sub-total $ 8,356,115  $ 8,006,428 
Valuation allowance (3,891,342) (92,418)
Sub-total $ 4,464,773  $ 7,914,010 
Deferred Tax Liabilities:
Cost recovery of leased and fixed assets $ (4,187,621) $ (3,578,283)
Other (70,867) (53,151)
Sub-total $ (4,258,488) $ (3,631,434)
Total net deferred tax asset $ 206,285  $ 4,282,576 
As of December 31, 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. As of December 31, 2021, the Company had no uncertain positions. Tax years subsequent to the year ended December 31, 2017, remain open to examination by federal and state tax authorities.
As of December 31, 2021 and 2020, the TRSs had cumulative net operating loss carryforwards ("NOL") of $28.7 million and $26.7 million, respectively. Net operating losses of $25.5 million generated during the years ended December 31, 2021, 2020, 2019 and 2018 may be carried forward indefinitely, subject to limitation. Net operating losses generated for years prior to December 31, 2018 may be carried forward for 20 years. If not utilized, the net operating loss will expire as follows: $328 thousand, $176 thousand, $828 thousand, and $2 million in the years ending December 31, 2034, 2035, 2036 and 2037, respectively. The Company also has a capital loss carryforward of $440 thousand as of December 31, 2021 and 2020, respectively, which if not utilized, 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 December 31, 2021 and 2020. Additionally, the Company determined that certain of the federal and state net operating losses would not be utilized prior to their expiration. Due to the uncertainty of realizing these deferred tax assets, a total valuation allowance of $3.8 million was recorded as of December 31, 2021. The valuation allowance at December 31, 2021 includes a $92 thousand valuation allowance for Corridor Private and $3.8 million valuation allowance for Corridor MoGas. In the future, if the Company concludes, based on existence of sufficient evidence, that it should realize more or less of the deferred tax assets, the valuation allowance will be adjusted accordingly in the period such conclusion is made.
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, permitted NOL carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allowed 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 were 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. 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 is reflected in the income tax provision for the year ended December 31, 2020.
Total income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate of 21 percent for the years ended December 31, 2021, 2020 and 2019, to income or loss from operations and other income and expense for the years presented, as follows:
Income Tax Expense (Benefit)
For the Years Ended December 31,
2021 2020 2019
Application of statutory income tax rate $ (2,717,152) $ (64,292,012) $ 904,111 
State income taxes, net of federal tax benefit 681,342  35,371  409,839 
Income of Real Estate Investment Trust not subject to tax 2,971,378  64,331,160  (941,900)
Increase in valuation allowance 3,159,313  —  — 
Other (20,122) (159,377) (137,432)
Total income tax expense (benefit) $ 4,074,759  $ (84,858) $ 234,618 
Total income taxes are computed by applying the federal statutory rate of 21 percent plus a blended state income tax rate. CorEnergy BBWS has a blended state income tax rate of approximately 3 percent for the years ended December 31, 2021 and December 31, 2020 and a blended state income tax rate of approximately 5 percent for the year ended December 31, 2019 due to its operations in Missouri. Because Corridor MoGas primarily only operates in the state of Missouri, a blended state income tax rate of 3 percent was used for the operation of the TRS for the years ended December 31, 2021 and December 31, 2020 and 5 percent was used for the year ended December 31, 2019. For CorEnergy BBWS and Corridor MoGas, the blended state rate includes the enacted decrease in the Missouri state income tax rate effective in 2020. As a result of the decreased rate, additional deferred state income taxes of $315 thousand resulting from the application of the newly enacted rate to existing deferred balances was recorded in the first quarter of 2019. Crimson Midstream Holding I operates only in the state of California and uses a net state rate of 7% for the year ended December 31, 2021.
For the years ended December 31, 2021, 2020 and 2019, all of the income tax expense (benefit) presented above relates to the assets and activities held in the Company's TRSs. The components of income tax expense (benefit) include the following for the periods presented:
Components of Income Tax Expense (Benefit)
For the Years Ended December 31,
2021 2020 2019
Current tax expense (benefit)
Federal $ (7,154) $ (420,074) $ (159,381)
State (net of federal tax benefit) 5,623  24,231  39,357 
Total current tax benefit $ (1,531) $ (395,843) $ (120,024)
Deferred tax expense (benefit)
Federal $ 3,400,571  $ 299,845  $ (15,840)
State (net of federal tax benefit) 675,719  11,140  370,482 
Total deferred tax expense $ 4,076,290  $ 310,985  $ 354,642 
Total income tax expense (benefit), net $ 4,074,759  $ (84,858) $ 234,618 
The aggregate cost of securities for federal income tax purposes and securities with unrealized appreciation and depreciation, were as follows:
Aggregate Cost of Securities for Income Tax Purposes
December 31, 2021 December 31, 2020
Aggregate cost for federal income tax purposes $ —  $ 301,314 
Gross unrealized appreciation —  — 
Gross unrealized depreciation —  — 
Net unrealized appreciation $ —  $ — 
The Company provides the following tax information to its Common Stockholders pertaining to the character of distributions paid during tax years 2021, 2020 and 2019. For a Common Stockholder that received all distributions in cash during 2021, 100.0 percent will be treated as return of capital. The per share characterization by quarter is reflected in the following tables (unaudited):
2021 Common Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/12/2021 2/11/2021 2/26/2021 $ 0.0500  $ —  $ —  $ —  $ 0.0500  $ — 
5/14/2021 5/13/2021 5/28/2021 0.0500  —  —  —  0.0500  — 
8/17/2021 8/16/2021 8/31/2021 0.0500  —  —  —  0.0500  — 
11/16/2021 11/15/2021 11/30/2021 0.0500  —  —  —  0.0500  — 
Total 2021 Distributions $ 0.2000  $ —  $ —  $ —  $ 0.2000  $ — 
2020 Common Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/14/2020 2/13/2020 2/28/2020 $ 0.7500  $ —  $ —  $ —  $ 0.7500  $ — 
5/15/2020 5/14/2020 5/29/2020 0.0500  —  —  —  0.0500  — 
8/17/2020 8/14/2020 8/31/2020 0.0500  —  —  —  0.0500  — 
11/16/2020 11/13/2020 11/30/2020 0.0500  —  —  —  0.0500  — 
Total 2020 Distributions $ 0.9000  $ —  $ —  $ —  $ 0.9000  $ — 
2019 Common Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/14/2019 2/13/2019 2/28/2019 $ 0.7500  $ 0.5803  $ —  $ 0.0156  $ 0.1541  $ 0.5803 
5/17/2019 5/16/2019 5/31/2019 0.7500  0.4578  —  0.0150  0.2772  0.4578 
8/16/2019 8/15/2019 8/30/2019 0.7500  0.4578  —  0.0150  0.2772  0.4578 
11/15/2019 11/14/2019 11/29/2019 0.7500  0.4578  —  0.0150  0.2772  0.4578 
Total 2019 Distributions $ 3.0000  $ 1.9537  $ —  $ 0.0606  $ 0.9857  $ 1.9537 
The Company provides the following tax information to its preferred stockholders pertaining to the character of distributions paid during the 2021, 2020 and 2019 tax years. For a preferred stockholder that received all distributions in cash during 2021, 100.0 percent will be treated as return of capital. The per share characterization by quarter is reflected in the following tables (unaudited):
2021 Preferred Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/12/2021 2/11/2021 2/26/2021 $ 0.4609  $ —  $ —  $ —  $ 0.4609  $ — 
5/14/2021 5/13/2021 5/28/2021 0.4609  —  —  —  0.4609  — 
8/17/2021 8/16/2021 8/31/2021 0.4609  —  —  —  0.4609  — 
11/16/2021 11/15/2021 11/30/2021 0.4609  —  —  —  0.4609  — 
Total 2021 Distributions $ 1.8436  $ —  $ —  $ —  $ 1.8436  $ — 
2020 Preferred Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/14/2020 2/13/2020 2/28/2020 $ 0.4609  $ —  $ —  $ —  $ 0.4609  $ — 
5/15/2020 5/14/2020 5/29/2020 0.4609  —  —  —  0.4609  — 
8/17/2020 8/14/2020 8/31/2020 0.4609  —  —  —  0.4609  — 
11/16/2020 11/13/2020 11/30/2020 0.4609  —  —  —  0.4609  — 
Total 2020 Distributions $ 1.8436  $ —  $ —  $ —  $ 1.8436  $ — 
2019 Preferred Stock Tax Information
Record Date Ex-Dividend Date Payable Date Total Distribution per Share Total Ordinary Dividends Qualified Dividends Capital Gain Distributions Nondividend Distributions Section 199A Dividends
2/14/2019 2/13/2019 2/28/2019 $ 0.4609  $ 0.4483  $ —  $ 0.0126  $ —  $ 0.4483 
5/17/2019 5/16/2019 5/31/2019 0.4609  0.4463  —  0.0146  —  0.4463 
8/16/2019 8/15/2019 8/30/2019 0.4609  0.4463  —  0.0146  —  0.4463 
11/15/2019 11/14/2019 11/29/2019 0.4609  0.4463  —  0.0146  —  0.4463 
Total 2019 Distributions $ 1.8436  $ 1.7872  $ —  $ 0.0564  $ —  $ 1.7872 
The Company elected, effective for the 2013 tax year, to be treated as a REIT for federal income tax purposes. The Company's REIT election, assuming continued compliance with the applicable tests, will continue in effect for subsequent tax years. The Company satisfied the annual income test and the quarterly asset tests necessary for us to qualify to be taxed as a REIT for 2021, 2020 and 2019.