Annual report pursuant to Section 13 and 15(d)

Income Tax

v3.20.4
Income Tax
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
We recorded an income tax benefit of approximately $3 million for the year ended December 31, 2020, an $8 million tax expense for the year ended December 31, 2019, and a $2 million tax expense for the year for the year ended 2018 related to the activities of our TRS. Of our $3 million benefit for the year ended December 31, 2020, approximately $1 million is related to the remeasurement of deferred tax liabilities as the result of the changes in our estimated state tax rates. The federal income tax expense and benefits recorded were determined using a rate of 21%. Our deferred tax assets and liabilities were measured using a federal rate of 21%. Below is a reconciliation between the federal statutory rates of our TRS entities and our effective tax rates for the years ended December 31:

2020 2019 2018
Federal statutory income tax rate 21  % 21  % 21  %
Changes in rate resulting from:
Share-based compensation (13) % 2  % (1) %
Equity method investments (12) % (2) % (11) %
Other (4) % (1) % 2  %
Valuation allowance —  % (15) % 2  %
Effective tax rate (8) % 5  % 13  %
Our deferred tax liability was $8 million and $14 million as of December 31, 2020 and 2019, respectively, related to the activities of our TRS. Our deferred tax liability is included in accounts payable, accrued expenses and other on our consolidated balance sheet. Deferred income taxes represent the tax effect from continuing operations of the differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following as of December 31:
2020 2019
  (in millions)
Net operating loss (NOL) carryforwards $ 63  $ 31 
Tax credit carryforwards 15  13 
Share-based compensation 3  3 
Other 9  3 
Valuation allowance —  — 
Gross deferred tax assets 90  50 
Receivables basis difference $ (12) $ (12)
Equity method investments (86) (52)
Gross deferred tax liabilities (98) (64)
Net deferred tax liabilities $ (8) $ (14)
We have unused NOLs of $264 million and tax credits of approximately $15 million. Approximately, $74 million of our NOLs will begin to expire in 2035. If our TRS entities were to experience a change in control as defined in Section 382 of the Internal Revenue Code, the TRS’s ability to utilize NOLs in the years after the change in control would be limited. Similar rules and limitation may apply for state tax purposes as well. Of our NOLs, $190 million were added in taxable years after 2018 which are not subject to expiration but are limited to 80% of taxable income. Our tax credits begin to expire in 2034.
We have no examinations in progress, none are expected at this time, and years 2017 through 2020 are open. As of December 2020 and 2019, we had no uncertain tax positions. Our policy is to recognize interest expense and penalties related to income tax matters as a component of general and administrative expense. There were no accrued interest and penalties as of December 31, 2020 and 2019, and no interest and penalties were recognized during the years ended December 31, 2020, 2019, or 2018.
For federal income tax purposes, the cash dividends paid for the years ended December 31, 2020 and 2019 are characterized as follows:
2020 2019
Common distributions
Ordinary income —  % 18  %
Return of capital 100  % 82  %
  100  % 100  %