SUN COMMUNITIES INCSUI
SUN COMMUNITIES INC Income Taxes Disclosure
11. Income Taxes
We have elected to be taxed as a REIT pursuant to Section 856(c) of the Internal Revenue Code of 1986, as amended ("Code"). In order for us to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90% of its REIT taxable income (calculated without any deduction for dividends paid and excluding capital gains) to its shareholders and meet other tests.
Qualification as a REIT involves the satisfaction of numerous requirements (on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are limited judicial or administrative interpretations and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which requires us to continually monitor our tax status. We analyzed the various REIT tests and confirmed that we continued to qualify as a REIT for the year ended December 31, 2025.
As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on the ordinary taxable income we distribute to our shareholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates. Even if we qualify as a REIT, we may be subject to certain state and local income taxes, as well as U.S. federal income and excise taxes on our undistributed income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. We are also subject to local income taxes in Canada and the UK due to certain properties located in those jurisdictions. We do not provide for withholding taxes on our undistributed earnings from our Canadian subsidiaries as they are reinvested and will continue to be reinvested indefinitely outside of the U.S. As currently structured, we are not subject to UK withholding taxes on distributions from our UK properties.
For income tax purposes, distributions paid to common shareholders consist of ordinary income, capital gains, and return of capital. Distributions paid per share were taxable as follows (unaudited / rounded):
Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percentage | Amount | Percentage | Amount | Percentage | ||||||||||||||||||||||||||||||
Ordinary income(1) | $ | 2.97 | 37.25 | % | $ | 1.98 | 52.70 | % | $ | 2.30 | 62.62 | % | |||||||||||||||||||||||
| Capital gain | 4.29 | 53.94 | % | 1.63 | 43.50 | % | — | — | % | ||||||||||||||||||||||||||
| Return of capital | 0.70 | 8.81 | % | 0.14 | 3.80 | % | 1.37 | 37.38 | % | ||||||||||||||||||||||||||
| Total distributions declared | $ | 7.96 | 100.00 | % | $ | 3.75 | 100.00 | % | $ | 3.67 | 100.00 | % | |||||||||||||||||||||||
(1)99.9995% of the ordinary taxable dividend qualifies as a Section 199A dividend for 2025 and 0.0005% of the ordinary taxable dividend qualifies as a Qualified Dividend for 2025.
The components of income / (loss) attributable to taxable subsidiaries before provision for income taxes are as follows (in millions):
Year Ended December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (61.4) | $ | (41.6) | $ | 1.6 | |||||||||||
| Foreign | (196.0) | (81.3) | (56.0) | ||||||||||||||
| Income / (loss) before provision for income taxes | $ | (257.4) | $ | (122.9) | $ | (54.4) | |||||||||||
The components of income tax expense / (benefit) attributable to continuing operations are as follows (in millions):
Year Ended December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
| State and Local | |||||||||||||||||
| Current | $ | 3.0 | $ | 2.4 | $ | 2.7 | |||||||||||
| Foreign | |||||||||||||||||
| Current | 7.8 | 1.2 | 11.0 | ||||||||||||||
| Deferred | (60.0) | (39.6) | (22.9) | ||||||||||||||
Total expense / (benefit)(1) | $ | (49.2) | $ | (36.0) | $ | (9.2) | |||||||||||
(1)We did not incur any income tax expense / (benefit) at the federal level for any of the periods presented.
A reconciliation of the provision / (benefit) for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes after the adoption of ASU 2023-09 is as follows (amounts in millions):
Year Ended December 31, | |||||||||||
2025 | |||||||||||
Federal provision / (benefit) at statutory tax rate | $ | (13.6) | 21.0 | % | |||||||
| Nontaxable or nondeductible items | |||||||||||
| Nontaxable REIT income | (40.4) | 62.2 | % | ||||||||
State and local taxes, net of federal benefit(1) | 3.0 | (4.6) | % | ||||||||
Change in valuation allowance | 12.9 | (19.9) | % | ||||||||
| Foreign tax effects | |||||||||||
| United Kingdom | |||||||||||
| Statutory tax rate difference between the UK and the U.S. | (7.8) | 12.0 | % | ||||||||
| Change in valuation allowance | 1.4 | (2.2) | % | ||||||||
| Foreign basis differences | (4.3) | 6.6 | % | ||||||||
| Deferred true ups | 4.1 | (6.3) | % | ||||||||
| Return to provision | (3.2) | 4.9 | % | ||||||||
| Nondeductible other expenses | 1.4 | (2.2) | % | ||||||||
| Other | (2.1) | 3.2 | % | ||||||||
| All other countries | (0.6) | 0.9 | % | ||||||||
| Total provision / (benefit) | (49.2) | 75.6 | % | ||||||||
(1)The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include New Hampshire, New York, and Texas.
(2)The was no impact to the total provision / (benefit) from the effect of changes in tax laws, cross-border tax laws, tax credits, and changes in unrecognized tax benefits for the period presented.
A reconciliation of the provision / (benefit) for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes prior to the adoption of ASU 2023-09 is as follows (amounts in millions):
Year Ended December 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
Pre-tax income / (loss) attributable to taxable subsidiaries | $ | (122.9) | $ | (54.4) | |||||||||||||||||||
Federal provision / (benefit) at statutory tax rate | (25.8) | 21.0 | % | (11.4) | 21.0 | % | |||||||||||||||||
State and local taxes, net of federal benefit(1) | 1.4 | (1.1) | % | 1.1 | (2.1) | % | |||||||||||||||||
Change in valuation allowance | 3.4 | (2.8) | % | 0.5 | (0.9) | % | |||||||||||||||||
| Foreign tax effects | (19.0) | 15.5 | % | 0.2 | (0.4) | % | |||||||||||||||||
Others | 3.0 | (0.9) | % | (1.1) | 1.8 | % | |||||||||||||||||
Tax provision / (benefit) - taxable subsidiaries | (37.0) | 31.7 | % | (10.7) | 19.4 | % | |||||||||||||||||
Other state taxes - flow through subsidiaries | 1.0 | 1.5 | |||||||||||||||||||||
| Total provision / (benefit) | $ | (36.0) | $ | (9.2) | |||||||||||||||||||
Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. Our temporary differences primarily relate to net operating loss carryforwards, depreciation, interest and basis differences between tax and GAAP. Our deferred tax assets that have a full valuation allowance relate to our taxable REIT subsidiaries.
The components of cash paid for income taxes was as follows (amounts in millions):
| Year Ended December 31, 2025 | |||||
| Federal | $ | — | |||
| State and local | |||||
| Texas | 0.7 | ||||
| New Hampshire | 0.5 | ||||
| New York | 0.3 | ||||
| All other state and local | 0.3 | ||||
| Foreign | |||||
| Canada | 2.1 | ||||
| United Kingdom | 1.1 | ||||
| Total cash paid for income taxes | $ | 5.0 | |||
During the years ended December 31, 2024 and 2023, total cash paid for incomes taxes for our continuing operations was $2.9 million and $20.3 million, respectively.
The deferred tax assets and liabilities included in the Consolidated Balance Sheets are comprised of the following tax effects of temporary differences and based on the most recent tax rate legislation (in millions):
As of December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
| Deferred Tax Assets | |||||||||||||||||
NOL carryforwards | $ | 15.8 | $ | 32.0 | $ | 28.7 | |||||||||||
Depreciation and basis differences | 58.7 | 24.7 | 24.1 | ||||||||||||||
Restricted interest carryforwards | 102.4 | 81.3 | 51.9 | ||||||||||||||
Other | 17.2 | 16.7 | 5.2 | ||||||||||||||
Gross deferred tax assets | 194.1 | 154.7 | 109.9 | ||||||||||||||
Valuation allowance | (53.7) | (61.2) | (51.8) | ||||||||||||||
Net deferred tax assets(1) | 140.4 | 93.5 | 58.1 | ||||||||||||||
| Deferred Tax Liabilities | |||||||||||||||||
Basis differences - US assets | — | — | — | ||||||||||||||
Basis differences - foreign investment(2) | (365.7) | (360.3) | (335.2) | ||||||||||||||
Gross deferred tax liabilities(1) | (365.7) | (360.3) | (335.2) | ||||||||||||||
| Net Deferred Tax Liability | $ | (225.3) | $ | (266.8) | $ | (277.1) | |||||||||||
(1)Net deferred tax assets and Gross deferred tax liabilities are netted and presented within Other liabilities in our Consolidated Balance Sheets, as they pertain to the same tax-paying component of the entity and the same tax jurisdiction.
(2)Balance as of December 31, 2025 relates to basis differences in our foreign investments in properties in the UK and Canada.
Our U.S. taxable REIT subsidiaries operating loss carryforwards are $77.5 million, or $15.8 million after tax, including SHS loss carryforwards of $71.4 million, or $15.0 million after tax, as of December 31, 2025. Our U.S. loss carryforwards arose in tax years after 2017 and can be carried forward indefinitely, but are subject to an 80% limit in future years. In addition, our Canadian subsidiaries have operating loss carryforwards of $0.4 million, or $0.1 million after tax, as of December 31, 2025. The loss carryforwards will begin to expire in 2040 through 2042 if not offset by future taxable income.
Our policy is to report income tax penalties and income tax related interest expense as a component of income tax expense. No interest or penalty associated with any unrecognized income tax provision or benefit was accrued, nor was any income tax related interest or penalty recognized during the years ended December 31, 2025, 2024, and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 23, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.