Income Taxes

The following table summarizes the tax status of dividends paid on our common shares during the years ended December 31, 2013, 2012, and 2011:



		2013	2012	2011
Dividend per share	$	1.85	1.85	1.85
Ordinary income		70%	71%	33%
Capital gain		6%	1%	1%
Return of capital		—%	28%	66%
Qualified dividend income		24%	—%	—%

RRG is subject to federal and state income taxes and files separate tax returns. Income tax expense consists of the following for the years ended December 31, 2013, 2012, and 2011 (in thousands):



		2013	2012	2011
Income tax expense (benefit):
Current	$	—	97	283
Deferred		—	13,727	2,422
Total income tax expense (benefit)	$	—	13,824	2,705

Income tax expense (benefit) is included in either income tax expense (benefit) of taxable REIT subsidiaries, if the related income is from continuing operations, or is included in operating income from discontinued operations, if from discontinued operations, on the Consolidated Statements of Operations for the years ended December 31, 2013, 2012, and 2011 as follows (in thousands):



		2013	2012	2011
Income tax expense (benefit) from:
Continuing operations	$	—	13,224	2,994
Discontinued operations		—	600	(289	)
Total income tax expense (benefit)	$	—	13,824	2,705

Income tax expense (benefit) differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to pretax income from continuing operations of RRG for the years ended December 31, 2013, 2012, and 2011 as follows (in thousands):



		2013		2012		2011
Computed expected tax expense (benefit)	$	1,677		(2,099	)	1,089
Increase (decrease) in income tax resulting from state taxes		98		(122	)	126
Valuation allowance		(1,511	)	15,635		1,438
All other items		(264	)	410		52
Total income tax expense		—		13,824		2,705
Amounts attributable to discontinued operations		—		600		(289	)
Amounts attributable to continuing operations	$	—		13,224		2,994

The following table represents the Company's net deferred tax assets recorded in other assets in the accompanying Consolidated Balance Sheets as of December 31, 2013 and 2012 (in thousands):



		2013		2012
Deferred tax assets
Investments in real estate partnerships	$	8,314		8,116
Provision for impairment		3,273		5,667
Deferred interest expense		4,295		4,507
Capitalized costs under Section 263A		2,184		2,637
Net operating loss carryforward		2,019		1,033
Employee benefits		488		838
Other		887		435
Deferred tax assets		21,460		23,233
Valuation allowance		(20,603	)	(22,114	)
Deferred tax assets, net		857		1,119
Deferred tax liabilities
Straight line rent		537		519
Depreciation		320		600
Deferred tax liabilities		857		1,119
Net deferred tax assets	$	—		—

During the years ended December 31, 2013 and 2012, the net change in the total valuation allowance was $1.5 million and $15.6 million, respectfully. The Company has federal and state net operating loss carryforwards totaling $5.6 million, which expire between 2025 and 2033.

The evaluation of the recoverability of the deferred tax assets and the need for a valuation allowance requires the Company to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The Company's framework for assessing the recoverability of deferred tax assets includes weighing recent taxable income (loss), projected future taxable income (loss) of the character necessary to realize the deferred tax assets, the carryforward periods for the net operating loss, including the effect of reversing taxable temporary differences, and prudent feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of deferred tax assets. As of December 31, 2013, the cumulative history of taxable losses and projected future taxable income within the TRS caused the Company to determine that it is still more likely than not that the net deferred tax assets will not be realized. As a result, the deferred tax asset continues to be fully reserved.

The Company accounts for uncertainties in income tax law in accordance with FASB ASC Topic 740, under which tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open tax years based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter. Federal and state tax returns are open from 2010 and forward for the Company. The 2011 tax year is currently under audit by the IRS for both the Company's taxable REIT subsidiary and the Operating Partnership.