NOTE 19 - INCOME TAXES

Our deferred tax asset of $4.0 million and $2.2 million at December 31, 2012 and 2011, respectively, relates primarily to the taxable loss of our TRSs. Our earnings (losses), other than in our TRSs, are not generally subject to federal corporate and state income taxes due to our REIT election. At December 31, 2012 and 2011, we estimated net operating loss carry forwards of our TRSs for federal and state income tax reporting purposes of $11.7 million and $6.2 million, respectively. No valuation allowances have been recorded against our deferred tax assets, as we believe the benefit is fully realizable based upon projected future taxable income.

We had no unrecognized tax benefits at December 31, 2012 or in the three year period then ended. We expect no significant changes in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2012. We have no material interest or penalties relating to income taxes recognized in the consolidated statements of operations for 2012, 2011 or 2010 or in the consolidated balance sheets as of December 31, 2012 or 2011.

Current tax liabilities of $0.2 million and $0.1 million at December 31, 2012 and 2011, respectively, are included in accrued expenses in the accompanying consolidated balance sheets and relate to state and local tax expense of the Operating Partnership.

The components of income tax expense (benefit) for 2012, 2011 and 2010 are (in thousands):

	Summit Hotel Properties, Inc.						Summit Hotel Properties, LLC (Predecessor)
	2012			Period 2/14/11 through 12/31/11			Period 1/1/11 through 2/13/11		2010

Current:
Federal	$	-		$	-		$	-	$	-
State and local		512			(129	)		339		202
Deferred:
Federal (34%)		(1,531	)		(1,867	)		-		-
State and local (6%)		(270	)		(329	)		-		-

	$	(1,289	)	$	(2,325	)	$	339	$	202

Our Predecessor was a limited liability company and all federal taxable income flowed through and was taxable to its members.

For federal income tax purposes, the cash distributions paid to our common 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 our common and Series A Cumulative Redeemable Preferred dividends for 2012 and 2011 follows:

	Common Dividends						Preferred Dividends
	2012			2011			2012			2011

Total dividends per share	$	0.45		$	0.28		$	2.31		$	0.21

Ordinary income		44.82	%		33.89	%		100.00	%		100.00	%
Capital gain		27.04	%		0.00	%		0.00	%		0.00	%
Return of capital		28.14	%		66.11	%		0.00	%		0.00	%

		100.00	%		100.00	%		100.00	%		100.00	%