NOTE 14 – INCOME TAXES

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with its taxable year ended December 31, 1999. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income to its shareholders. It is the Company’s current intention to adhere to these requirements and maintain the Company’s qualification for taxation as a REIT. As a REIT, the Company generally will not be subject to federal corporate income tax on that portion of its net income that is currently distributed to shareholders. If the Company fails to qualify for taxation as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.

Taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. 44 New England is subject to income taxes at the applicable federal, state and local tax rates.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income from continuing operations as a result of the following differences:


		For the year ended December 31,
		2013		2012		2011
Statutory federal income tax provision	$	5,152	$	1,409	$	34
Adjustment for nontaxable loss		(7,472)		(623)		(6,170)
State income taxes, net of federal income tax effect		(1,317)		151		(1,146)
Recognition of deferred tax assets		(1,963)		-		-
Changes in valuation allowance		-		(4,292)		7,282

Total income tax benefit	$	(5,600)	$	(3,355)	$	-

The components of the Company’s income tax expense (benefit) from continuing operations for the years ended December 31, 2013, 2012 and 2011 were as follows:


		For the year ended December 31,
		2013		2012		2011
Income tax expense (benefit):
Current:
Federal	$	-	$	-	$	-
State		-		229		-
Deferred:
Federal		(3,604)		(3,584)		-
State		(1,996)		-		-
Total	$	(5,600)	$	(3,355)	$	-

Income tax expense (benefit):
From continuing operations		(5,600)		(3,355)		-
From discontinued operations		190		-		-
Total	$	(5,410)	$	(3,355)	$	-

NOTE 14 – INCOME TAXES (CONTINUED)

The components of consolidated TRS’s net deferred tax asset as of December 31, 2013 and 2012 were as follows:


		As of December 31,
		2013		2012
Deferred tax assets:
Net operating loss carryforwards	$	8,605	$	4,234
Accrued expenses and other		685		(75)
Tax credit carryforwards		280		-
Net deferred tax assets		9,570		4,159
Valuation allowance		(804)		(804)
Deferred tax assets	$	8,766	$	3,355

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on limitations related to the utilization of certain tax attribute carryforwards, Management recorded a valuation allowance of approximately $804 as these attributes are not more likely than not to be realized prior to their expiration. Based on the level of historical taxable income, tax planning strategies and projections for future taxable income over the periods in which the remaining deferred tax assets are deductible, Management believes it is more likely than not that the remaining deferred tax assets will be realized.

As of December 31, 2013, we have gross federal net operating loss carryforwards of $21,798 which expire over various periods from 2023 through 2033. As of December 31, 2013, we have gross state net operating loss carryforwards of $22,210 which expire over various periods from 2014 to 2033. The Company has tax credits of $280 available which begin to expire in 2028.

Earnings and profits, which will determine the taxability of distributions to shareholders, will differ from net income reported for financial reporting purposes due to the differences for federal tax purposes in the estimated useful lives and methods used to compute depreciation. The following table sets forth certain per share information regarding the Company’s common and preferred share distributions for the years ended December 31, 2013, 2012 and 2011.


	2013	2012	2011
Preferred Shares - 8% Series A
Ordinary income	100.00%	100.00%	100.00%
Return of Capital	0.00%	0.00%	0.00%
Capital Gain Distribution	0.00%	0.00%	0.00%
Preferred Shares - 8% Series B
Ordinary income	100.00%	100.00%	100.00%
Return of Capital	0.00%	0.00%	0.00%
Capital Gain Distribution	0.00%	0.00%	0.00%
Preferred Shares - 6.875% Series C
Ordinary income	100.00%	N/A	N/A
Return of Capital	0.00%	N/A	N/A
Capital Gain Distribution	0.00%	N/A	N/A
Common Shares - Class A
Ordinary income	45.15%	1.28%	73.30%
Return of Capital	54.85%	98.72%	26.70%
Capital Gain Distribution	0.00%	0.00%	0.00%