NOTE 13 — INCOME TAXES

Our earnings (losses), other than from our TRS, are not generally subject to federal corporate and state income taxes due to our REIT election. We believe we have met the annual REIT distribution requirement by payment of at least 90% of our taxable income for 2015, 2014, and 2013. For federal income tax purposes, the cash distributions paid to our common and preferred stockholders may be characterized as ordinary income, return of capital (generally non-taxable), or capital gains.

The components of income tax expense for for the years ended December 31, 2015, 2014, and 2013 are as follows (in thousands):

	2015			2014			2013

Current:
Federal	$	81		$	133		$	—
State and local	408			712			408
Deferred
Federal	(159		)	—			3,352
State and local	223			(127		)	597

Total provision	$	553		$	718		$	4,357


Income tax expense (benefit)
From continuing operations	$	553		$	744		$	4,894
From discontinued operations	—			(26		)	(537		)

Total provision	$	553		$	718		$	4,357

A reconciliation of the federal statutory rate to the effective income tax rate for the TRS follows (in thousands):

	2015			2014			2013
Tax provision (benefit) at U.S. statutory rates on TRS income (loss) subject to tax	$	2,345		$	2,024		$	(809	)
State Income tax, net of federal income tax benefit	486			77			(120		)
Effect of permanent differences and other	(161		)	727			(152		)
Increase (decrease) in valuation allowance	(2,448		)	(2,580		)	5,029

TRS income tax expense	$	222		$	248		$	3,948



	2015			2014			2013

Total provision (benefit) for TRS and Operating Partnership
TRS Income Tax Expense	$	222		$	248		$	3,948
Operating Partnership state income tax expense	331			470			409

Total provision	$	553		$	718		$	4,357

Current tax liabilities are included in Accrued expenses and other in the accompanying Consolidated Balance Sheets.

Significant components of deferred tax assets (liabilities) are as follows (in thousands):

	2015			2014

Tax carryforwards	$	1,481		$	3,187
Investments	(1,349		)	(1,298		)
Accrued expenses	—			580
Other	(20		)	155

Total	112			2,624
Valuation Allowance	—			(2,448		)

Net Deferred Tax Assets	$	112		$	176


Gross Deferred Tax Assets	$	1,515		$	3,943
Gross Deferred Tax Liabilities	(1,403		)	(1,319		)
Valuation Allowance	—			(2,448		)

Net Deferred Tax Assets	$	112		$	176

At December 31, 2014, we had a valuation allowance of $2.4 million to offset deferred tax assets based on our assessment of realizability. During the year ended December 31, 2014, the utilization of tax attributes to offset taxable income reduced the overall amount of deferred tax assets subject to the valuation allowance. At December 31, 2015, the Company had gross deferred tax assets of $1.5 million primarily related to net operating loss carryforwards and $1.3 million in deferred tax liabilities related to an investment in a joint venture. We have concluded that it is more-likely-than-not that our deferred tax assets will be realized and therefore, the valuation allowance has been reduced to zero at December 31, 2015.

At December 31, 2015, we had (i) U.S. federal net operating losses of $3.2 million which expire in the years 2032 to 2033 (ii) state net operating losses of $2.9 million which expire beginning in 2026 and (iii) federal minimum tax credits of $0.2 million which do not expire.

We had no unrecognized tax benefits at December 31, 2015 or in the three year period then ended. The Company recognizes interest expense and penalties associated with uncertain tax positions as a component of income tax expense. We have no material interest or penalties relating to unrecognized tax benefits in the Consolidated Statements of Operations for 2015, 2014 or 2013 or in the Consolidated Balance Sheets as of December 31, 2015 or 2014.

We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. We currently have no open audits related to our income tax returns. In general, we are not subject to tax examinations by tax authorities for years before 2012.