NOTE 19 - INCOME TAXES

The deferred tax asset of $2,195,820 relates primarily to the taxable loss of the Company’s taxable REIT subsidiaries. The earnings (loss), other than in the taxable REIT subsidiaries of the Company are not generally subject to Federal income taxes at the Company level, due to the REIT election made by the Company. As of December 31, 2011, the Company has estimated net operating loss carry forwards of the taxable REIT subsidiaries for federal income tax reporting purposes of approximately $5.5 million. No valuation allowances have been recorded against the Company’s deferred tax assets, as the Company believes the income tax benefit is fully realizable based upon projected future taxable income.

The Company had no unrecognized tax benefits as of or during the three year period ended December 31, 2011. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2011. The Company has no material interest or penalties relating to income taxes recognized in the consolidated statements of operations for the years ended December 31, 2011, 2010, and 2009 or in the consolidated balance sheets as of December 31, 2011 and 2010.

Current tax liabilities of $148,879 are included in accrued expenses on the accompanying Consolidated Balance Sheets and relate to the state and local tax expense of the Operating Partnership.

The components of income tax expense (benefit) for the years ended December 31, 2011, 2010 and 2009 are:

	Summit Hotel Properties, Inc.			Summit Hotel Properties, LLC (Predecessor)
	Period 2/14/11 through 12/31/11			Period 1/1/11 through 2/13/11		2010		2009
Current:
Federal	$	-		$	-	$	-	$	-
State and local		(129,163	)		339,034		202,163		-
Deferred:
Federal (34%)		(1,866,447	)		-		-		-
State and local (6%)		(329,373	)		-		-		-
	$	(2,324,983	)	$	339,034	$	202,163	$	-

Our Predecessor is a limited liability company and as such, all Federal taxable income of a limited liability company flows through and is taxable to its members.

For Federal income tax purposes, the cash distributions paid to the Company’s common shareholders and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains.

A summary of the average taxable nature of the Company’s common dividends for the year ended December 31, 2011, is as follows:

	2011
Total dividends per share	$	0.28

Ordinary income		33.89	%
Return of capital		66.11	%
		100.00	%

A summary of the average taxable nature of the Company’s dividend on Series A Cumulative Redeemable Preferred Shares for the year ended December 31, 2011, is as follows:

	2011
Total dividends per share	$	0.21

Ordinary income		100.00	%
Return of capital		0.00	%
		100.00	%