Income Tax Provision

12 Months Ended

Dec. 31, 2016

12. Income Tax Provision

The Partnership recognizes current income tax expense for federal, state, and local income taxes incurred by our taxable subsidiary, The Greens Hold Co, which owns all the MF Properties except for the Suites on Paseo and Jade Park. The Partnership’s income tax expense fluctuates from period to period based on the timing of the taxable income. Deferred income tax expense is generally a function of the period’s temporary differences and the utilization of net operating losses generated in prior years that had been previously recognized as a deferred income tax asset. The net operating loss carryover reported on the Greens Hold Co 2015 tax return will be utilized in its entirety in 2016 due to the gain on sale of Arboretum. Accordingly, the valuation allowance of $405,000 at December 31, 2015 was reversed and a tax provision has been recorded during the year ended December 31, 2016.

There was no income tax expense or benefit for the years ended December 31, 2015 and 2014. The following table summarizes our income tax expense for the years ended December 31, 2016, 2015 and 2014:

	For the Years Ended December 31,
	2016
Current income tax expense:
Current income tax expense	$	-
Current income tax expense on dispositions		4,593,000
Deferred income tax expense:
Deferred income tax expense (benefit)		366,000
Total income tax expense	$	4,959,000

For the year ended December 31, 2016, income taxes computed by applying the U.S. Federal statutory rates to income from continuing operations before income taxes for the Greens Holdco are reconciled to the provision for income taxes set forth in the consolidated statements of operations as follows:

	As of December 31,
	2016
Expected tax expense at U.S. Federal statutory rate of 35%	$	4,684,431
State income taxes, net of federal income tax effect		733,038
Impact of changes in valuation allowances		(535,641	)
Other		77,172
Provision for income taxes	$	4,959,000

For the years ended December 31, 2015 and 2014, the Greens Hold Co reported no income tax expense or benefit due to current net operating losses or the utilization of net operating loss carryforwards.

The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

	December 31, 2016
Deferred tax assets (liabilities):
Depreciation and amortization	$	(322,178	)
Prepaid expenses		(50,935	)
Accruals and reserves		7,113
Gross deferred tax liabilities		(366,000	)
Valuation allowance		-
Net deferred tax liabilities	$	(366,000	)

The Partnership accrues interest and penalties associated with uncertain tax positions as part of income tax expense. There was no accrued interest or penalties at December 31, 2016 and 2015.

The Company files U.S. Federal and state tax returns. The Partnership’s returns for years 2013 through 2015 remain subject to examination by the Internal Revenue Service.