INCOME TAXES

Income tax expense (benefit) consists of the following:



	Three Months Ended March 31,
	2015			2014
Current:
Federal	$	736		$	217
State and Local	(1,156		)	70
Total Current Income Tax Expense (Benefit)	(420		)	287
Deferred:
Federal	(1,323		)	—
State and Local	(1,684		)	—
Total Deferred Income Tax Expense (Benefit)	(3,007		)	—
Total Income Tax Expense (Benefit)	$	(3,427	)	$	287

New Residential intends to qualify as a REIT for the tax years ending December 31, 2014 and 2015. A REIT is generally not subject to U.S. federal corporate income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements.

New Residential operates a securitization vehicle and has made certain investments, particularly its investments in servicer advances (Note 6) and REO (Note 8), through TRSs that are subject to regular corporate income taxes which have been provided for in the provision for income taxes, as applicable. New Residential and its subsidiaries file income tax returns with the U.S. federal government and various state and local jurisdictions beginning with the tax year ending December 31, 2013. Generally, these income tax returns will be subject to tax examinations by tax authorities for a period of three years after the date of filing.

As of December 31, 2014, New Residential recorded an increase to the income tax provision of $2.3 million for unrecognized tax benefits. The reserve for unrecognized tax benefits related to state and local tax positions expected to be taken on the income tax returns. As a result of information received from local tax authorities, New Residential has determined that the reserve for unrecognized tax benefits is no longer needed and has reduced the reserve for unrecognized tax benefits to zero as of March 31, 2015. As a result, New Residential recorded a benefit of $2.3 million to the income tax provision as of March 31, 2015.

New Residential has recorded a net deferred tax liability of approximately $13.4 million as of March 31, 2015. This deferred tax liability primarily relates to unrealized gains from New Residential’s investment in servicer advances.