Note 2 – Income Taxes

        The Company’s taxable REIT subsidiaries are subject to corporate level income taxes, which are provided for in the Company’s financial statements. The Company’s deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases 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. The Company’s temporary differences primarily relate to deferred compensation and depreciation. During the three and six months ended June 30, 2006, the Company’s federal income tax expense was zero as a result of a net operating loss incurred from its taxable REIT subsidiaries. As of June 30, 2006, the Company had a net deferred tax asset of $3.4 million, after a valuation allowance of $8.6 million. As of December 31, 2005, the net deferred tax asset was $3.2 million, after a valuation allowance of $9.6 million.

8

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 2 – Income Taxes

        The Company’s taxable REIT subsidiaries are subject to corporate level income taxes, which are provided for in the Company’s financial statements. The Company’s deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases 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. The Company’s temporary differences primarily relate to deferred compensation and depreciation. During the three months ended March 31, 2006, the Company’s federal income tax expense was zero as a result of a net operating loss incurred from its taxable REIT subsidiaries. As of March 31, 2006, the Company had a net deferred tax asset of $3.2 million, after a valuation allowance of $10.0 million. As of December 31, 2005, the net deferred tax asset was $3.2 million, after a valuation allowance of $9.6 million.

Note 5 — Income Taxes

        During the years ended December 31, 2005, 2004, and 2003, the Company’s federal income tax expense was zero as a result of net operating losses incurred by the Company’s Taxable REIT Subsidiaries, except as follows related to the sale of Woodland. During 2005, the Company recognized deferred federal income tax expense of $0.5 million in connection with the sale of Woodland. The Company has a net operating loss carryforward from its Taxable REIT Subsidiaries of $0.8 million from 2002 that expires in 2022, and an estimated net operating loss carryforward of $3.8 million from 2004 that will expire in 2024. As of December 31, 2005, 2004, and 2003, the Company had net deferred tax assets of $3.2 million, $3.4 million, and $3.4 million, after valuation allowances of $9.6 million, $9.4 million, and $9.9 million, respectively.

        Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables. The tax status of the Company’s dividends in 2005, 2004, and 2003 may not be indicative of future periods. The portion of dividends paid in 2005 shown below as capital gains and unrecaptured Section 1250 capital gains are designated as capital gain dividends for tax purposes.

        The Company redeemed 3,480,000 shares of its 8,000,000 outstanding Series A Preferred Shares on July 11, 2005 for $25 per share and paid to all holders of the Series A Preferred Shares $0.0576389 per share in accrued dividends, which are reported separately above as a 2005 dividend payment. Because the redemption of the Series A Preferred Stock was a partial, rather than a full, redemption, the appropriate income tax treatment of the $25 per share redemption payment (whether capital gain or loss from the sale or exchange of stock or ordinary income from a dividend payment) depends on an individual investor’s facts and circumstances.

F-17

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

Note 2 – Income Taxes

        The Company’s taxable REIT subsidiaries are subject to corporate level income taxes, which are provided for in the Company’s financial statements. The Company’s deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases 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. The Company’s temporary differences primarily relate to deferred compensation and depreciation. During the three and nine months ended September 30, 2005, the Company’s federal income tax expense was zero as a result of a net operating loss incurred from its taxable REIT subsidiaries. As of September 30, 2005, the Company had a net deferred tax asset of $3.1 million, after a valuation allowance of $8.9 million. As of December 31, 2004, the net deferred tax asset was $3.4 million, after a valuation allowance of $9.4 million.

Note 2 – Income Taxes

        The Company’s taxable REIT subsidiaries are subject to corporate level income taxes, which are provided for in the Company’s financial statements. The Company’s deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases 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. The Company’s temporary differences primarily relate to deferred compensation and depreciation. During the three and six months ended June 30, 2005, the Company’s federal income tax expense was zero as a result of a net operating loss incurred from its taxable REIT subsidiaries. As of June 30, 2005, the Company had a net deferred tax asset of $3.1 million, after a valuation allowance of $10.0 million. As of December 31, 2004, the net deferred tax asset was $3.4 million, after a valuation allowance of $9.4 million.

Note 2 – Income Taxes

        The Company’s taxable REIT subsidiaries are subject to corporate level income taxes, which are provided for in the Company’s financial statements. The Company’s deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases 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. The Company’s temporary differences primarily relate to deferred compensation and depreciation. During the three months ended March 31, 2005, the Company’s federal income tax expense was zero as a result of a net operating loss incurred from its taxable REIT subsidiaries. As of March 31, 2005, the Company had a net deferred tax asset of $3.1 million, after a valuation allowance of $9.8 million. As of December 31, 2004, the net deferred tax asset was $3.4 million, after a valuation allowance of $9.4 million.

6

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 5 — Income Taxes

        During the years ended December 31, 2004, 2003, and 2002, the Company’s federal income tax expense was zero as a result of net operating losses incurred by the Company’s Taxable REIT Subsidiaries. For the years ended December 31, 2004 and 2003, the Company’s state income tax expense was zero as a result of a net operating loss incurred by the Company’s Taxable REIT Subsidiaries. The Company has a net operating loss carryforward from its Taxable REIT Subsidiaries of $0.8 million from 2002 that expires in 2022, and an estimated net operating loss carryforward of $4.3 million from 2004 that will expire in 2024. For the year ended December 31, 2002, state income tax expense of the Company’s Taxable REIT Subsidiaries was $0.1 million. As of December 31, 2004 and 2003, the Company had net deferred tax assets of $3.4 million and $3.4 million, after valuation allowances of $9.4 million and $9.9 million, respectively.

        Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables. The tax status of the Company’s dividends in 2004, 2003, and 2002 may not be indicative of future periods. The portion of dividends paid in 2004 shown below as capital gains are designated as capital gain dividends for tax purposes.