Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

11. Income Taxes

The Company has elected to be taxed as a REIT under the Code. As a REIT the Company generally will not be subject to corporate level federal income taxes on net income it distributes to its stockholders. 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 taxes.

The Company leases its hotels to wholly owned TRSs that are subject to federal and state income taxes. The Company accounts for income taxes in accordance with the provisions of the Income Taxes Topic of the FASB ASC, which requires the Company to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases.

The income tax benefit (provision) included in the consolidated financial statements is as follows (in thousands):

	Year EndedDecember 31,2011			Year EndedDecember 31, 2010			Year EndedDecember 31, 2009
Current:
Federal	$	—		$	—		$	—
State	—			—			—
	—			—			—
Deferred:
Federal	345			4,187			5,177
State	96			1,069			1,317
	441			5,256			6,494
Valuation allowance	(441		)	(5,256		)	(6,494		)
Provision for income taxes	$	—		$	—		$	—

The tax effects of temporary differences giving rise to the deferred tax assets (liabilities) are as follows (in thousands):

	December 31,
	2011			2010
NOL carryover	$	39,097		$	36,636
Other reserves	3,035			1,848
State taxes and other	(1,725		)	1,582
Deferred tax asset before valuation allowance	40,407			40,066
Depreciation	(50		)	(151		)
Deferred tax liability before valuation allowance	(50		)	(151		)
Deferred tax assets (liabilities), net	40,357			39,915
Valuation allowance	(40,357		)	(39,915		)
	$	—		$	—

The Company has provided a valuation allowance against its deferred tax asset at December 31, 2011 and 2010. The valuation allowance is due to the uncertainty of realizing the Company’s historical operating losses. Accordingly, no provision or benefit for income taxes is reflected in the accompanying consolidated statements of operations.

At December 31, 2011 and 2010, net operating loss carryforwards for federal income tax purposes total approximately $96.1 million and $93.0 million, respectively. These losses, which begin to expire in 2019, are available to offset future income through 2030.

Characterization of Distributions

For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. For the years ended December 31, 2011, 2010 and 2009, distributions paid per share were characterized as follows (unaudited):

	2011				2010				2009
	Amount		%		Amount		%		Amount		%
Common Stock:
Ordinary income	$	—	—	%	$	—	—	%	$	—	—	%
Capital gain	—		—		—		—		—		—
Return of capital	—		—		—		—		—		—
Total	$	—	—	%	$	—	—	%	$	—	—	%
Preferred Stock — Series A
Ordinary income	$	2.500	100.000	%	$	1.010	67.321	%	$	2.000	100.000	%
Capital gain	—		—		—		—		—		—
Return of capital	—		—		0.490		32.679		—		—
Total	$	2.500	100.000	%	$	1.500	100.000	%	$	2.000	100.000	%
Preferred Stock — Series C
Ordinary income	$	1.965	100.000	%	$	0.794	67.321	%	$	1.572	100.000	%
Capital gain	—		—		—		—		—		—
Return of capital	—		—		0.385		32.679		—		—
Total	$	1.965	100.000	%	$	1.179	100.000	%	$	1.572	100.000	%
Preferred Stock — Series D
Ordinary income	$	1.472	100.000	%	$	—	—	%	$	—	—	%
Capital gain	—		—		—		—		—		—
Return of capital	—		—		—		—		—		—
Total	$	1.472	100.000	%	$	—	—	%	$	—	—	%