Annual report pursuant to Section 13 and 15(d)

Income Tax

v3.22.0.1
Income Tax
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax Income TaxWe recorded an income tax benefit (expense) of approximately $(17) million for the year ended December 31, 2021, a $3 million tax benefit (expense) for the year ended December 31, 2020, and an $(8) million tax benefit (expense) for the year for the year ended 2019 related to the activities of our TRS. 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:
2021 2020 2019
Federal statutory income tax rate 21  % 21  % 21  %
Changes in rate resulting from:
Share-based compensation (4) % (13) % 2  %
Equity method investments (2) % (12) % (2) %
Other 5  % (4) % (1) %
Valuation allowance —  % —  % (15) %
Effective tax rate 20  % (8) % 5  %
Our deferred tax liability was $25 million and $8 million as of December 31, 2021 and 2020, 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:
2021 2020
  (in millions)
Net operating loss (NOL) carryforwards $ 75  $ 63 
Tax credit carryforwards 16  15 
Share-based compensation 3  3 
Other 13  9 
Valuation allowance —  — 
Gross deferred tax assets 107  90 
Receivables basis difference $ (15) $ (12)
Equity method investments (117) (86)
Gross deferred tax liabilities (132) (98)
Net deferred tax liabilities $ (25) $ (8)
We have unused NOLs of $306 million and tax credits of approximately $16 million. Approximately, $87 million of our NOLs will begin to expire in 2034. 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, $219 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 2018 through 2021 are open. As of December 2021 and 2020, 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, 2021 and 2020, and no interest and penalties were recognized during the years ended December 31, 2021, 2020, or 2019.
For federal income tax purposes, the cash dividends paid for the years ended December 31, 2021 and 2020 are characterized as follows:
2021 2020
Common distributions
Ordinary income 14  % —  %
Return of capital 86  % 100  %
  100  % 100  %