Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner that allows us to continue to qualify as a REIT. Under the REIT operating structure, we are permitted to deduct distributions paid to our stockholders and generally will not be required to pay U.S. federal income taxes. Accordingly, no provision has been made for U.S. federal income taxes in the consolidated financial statements.

We conduct business in various states and municipalities within the United States, Europe, and Asia, and as a result, we file income tax returns in the U.S. federal jurisdiction and various states and certain foreign jurisdictions.

The components of our provision for income taxes attributable to continuing operations for the periods presented are as follows (in thousands):



	Years Ended December 31,
	2015		2014		2013
Federal
Current	$	110	$	110	$	175
Deferred	954		7,078		—
	1,064		7,188		175
State and Local
Current	840		426		771
Deferred	1,312		—		—
	2,152		426		771
Foreign
Current	3,787		2,600		2,369
Deferred	1,882		511		(1,848		)
	5,669		3,111		521
Total Provision	$	8,885	$	10,725	$	1,467

In connection with our adoption of equity method accounting in 2014 for our investments in BG LLH, LLC and Shelborne Operating Associates, LLC, we recorded a deferred tax provision of $2.3 million in 2015 and $7.1 million in 2014.

We account for uncertain tax positions in accordance with ASC 740, Income Taxes. The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits (in thousands):



	Years Ended December 31,
	2015			2014
Beginning balance	$	589		$	857
Decrease due to lapse in statute of limitations	(362		)	(216		)
Foreign currency translation adjustments	(29		)	(52		)
Ending balance	$	198		$	589

At December 31, 2015 and 2014, we had unrecognized tax benefits as presented in the table above that, if recognized, would have a favorable impact on our effective income tax rate in future periods. We recognize interest and penalties related to uncertain tax positions in income tax expense. At both December 31, 2015 and 2014, we had less than $0.1 million of accrued interest related to uncertain tax positions.

Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years 2010 through 2015 remain open to examination by the major taxing jurisdictions to which we are subject.

Deferred Income Taxes

Our deferred tax assets before valuation allowances were $33.1 million and $16.2 million at December 31, 2015 and 2014, respectively. Our deferred tax liabilities were $24.9 million and $12.2 million at December 31, 2015 and 2014, respectively. We determined that $29.0 million and $13.1 million of our deferred tax assets did not meet the criteria for recognition under the accounting guidance for income taxes and accordingly, we established valuation allowances in those amounts at December 31, 2015 and 2014, respectively. Our deferred tax assets and liabilities at December 31, 2015 and 2014 are primarily the result of temporary differences related to:

•

basis differences between tax and GAAP for real estate assets and equity investments (For income tax purposes, certain acquisitions have resulted in us assuming the seller’s basis, or the carry-over basis, in assets and liabilities for tax purposes. In accordance with purchase accounting requirements under GAAP, we record all of the acquired assets and liabilities at their estimated fair values at the date of acquisition. For our subsidiaries subject to income taxes in the United States or in foreign jurisdictions, we recognize deferred income tax liabilities representing the tax effect of the difference between the tax basis and the fair value of the tangible and intangible assets recorded at the date of acquisition for GAAP.); and


•	tax net operating losses in foreign jurisdictions that may be realized in future periods if we generate sufficient taxable income.

At December 31, 2015, we had net operating losses in U.S. federal, state, and foreign jurisdictions of approximately $30.8 million, $23.5 million, and $32.0 million, respectively. At December 31, 2014, we had net operating losses in U.S. federal, state and foreign jurisdictions of approximately $11.8 million, $7.6 million, and $46.6 million, respectively. If not utilized, the U.S. federal net operating loss carryforwards will begin to expire in 2032. The state and local net operating loss carryforwards will begin to expire in 2017. Certain of our foreign net operating loss carryforwards will begin to expire in 2016. The utilization of net operating losses may be subject to certain limitations under the tax laws of the relevant jurisdiction.