INCOME TAXES

We have elected to be taxed as a REIT. As a REIT, we are generally not subject to corporate level income taxes on taxable income we distribute to our shareholders. We believe we have met the annual REIT distribution requirement by distribution of at least 90% of our taxable income to our shareholders.

Income related to our TRS is subject to federal, state and local taxes at applicable tax rates. Our consolidated tax provision includes the income tax provision related to the operations of the TRS as well as state and local income taxes related to the Operating Partnership.

The components of income tax expense (benefit) for the years ended December 31, 2016, 2015, and 2014 are as follows (in thousands):



	2016			2015			2014
Current:
Federal	$	37		$	81		$	133
State and local	904			408			712
Deferred
Federal	(1,918		)	(159		)	—
State and local	(473		)	223			(127		)
Income tax expense (benefit)	$	(1,450	)	$	553		$	718

Income tax expense (benefit)
From continuing operations	$	(1,450	)	$	553		$	744
From discontinued operations	—			—			(26		)
Income tax expense (benefit)	$	(1,450	)	$	553		$	718

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



	2016			2015			2014
Tax provision (benefit) at U.S. statutory rates on TRS income (loss) subject to tax	$	(1,157	)	$	2,345		$	2,024
State income tax, net of federal income tax benefit	65			486			77
Provision to return and deferred adjustment	(872		)	—			—
Effect of permanent differences and other	31			(161		)	727
Decrease in valuation allowance	—			(2,448		)	(2,580		)
TRS income tax expense (benefit)	$	(1,933	)	$	222		$	248



	2016			2015		2014
Total provision (benefit) for TRS and Operating Partnership:
TRS income tax expense (benefit)	$	(1,933	)	$	222	$	248
Operating Partnership state and local income tax expense	483			331		470
Income tax expense (benefit)	$	(1,450	)	$	553	$	718

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):



	2016			2015
Tax carryforwards	$	767		$	1,481
Investments	—			(1,349		)
Accrued expenses	1,744			—
Other	(8		)	(20		)
Net deferred tax assets	$	2,503		$	112

Gross deferred tax assets	$	2,580		$	1,515
Gross deferred tax liabilities	(77		)	(1,403		)
Net deferred tax assets	$	2,503		$	112

At December 31, 2015, we reduced our valuation allowance to zero as we determined that it was more likely than not that our net deferred tax assets would be realized. The release of the valuation allowance resulted in a non-cash tax benefit of $0.1 million. During the year ended December 31, 2015, the TRS profits were offset by net operating loss carryforwards. As we had a valuation allowance against substantially all of our net deferred tax assets at December 31, 2014, the utilization of tax attributes to offset profits reduced the overall level of deferred tax assets subject to the valuation allowance. At December 31, 2015, we had gross deferred tax assets of $1.5 million primarily related to net operating loss carryforwards and a $1.3 million deferred tax liability related to an investment in a joint venture.

At December 31, 2016, we had (i) U.S. federal net operating losses of $1.1 million which expire in 2033 (ii) state net operating losses of $2.6 million which expire beginning in 2027 and (iii) federal minimum tax credits of $0.2 million which do not expire.

We had no unrecognized tax benefits at December 31, 2016 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 the years ended December 31, 2016, 2015 or 2014 or in the Consolidated Balance Sheets as of December 31, 2016 or 2015.

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 2013.