10. Income Taxes

The Company has elected to be taxed as a REIT effective January 1, 2013, pursuant to the U.S. Internal Revenue Code of 1986, as amended. As a REIT, generally the Company will not be subject to federal corporate income taxes on ordinary taxable income and capital gains income from real estate investments that it distributes to its stockholders. The Company will, however, be subject to corporate income taxes on built-in gains (the excess of fair market value over tax basis at January 1, 2013) that result from gains on certain assets. In addition, the Company will continue to be required to pay federal and state corporate income taxes on earnings of its TRSs.

The benefit for income taxes for continuing operations consists of the following (amounts in thousands):


	2015			2014			2013
CURRENT:
Federal	$	(763	)	$	(2,071	)	$	4,528
State		(1,229	)		(2,339	)		(1,396	)

Total current (provision) benefit		(1,992	)		(4,410	)		3,132

DEFERRED:
Federal		8,866			2,588			84,918
State		(248	)		3,289			4,612
Effect of federal tax law change		5,229			—			—

Total deferred benefit		13,847			5,877			89,530

Total benefit for income taxes	$	11,855		$	1,467		$	92,662

In December 2015, the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) was passed. The PATH Act made permanent several key tax provisions including lowering the recognition period related to built-in gains from ten years to five years. As a result, the Company recorded a one-time, non-cash tax benefit of $5.2 million during the fourth quarter of 2015 to reflect this change.

The Company is required to distribute at least 90% of its annual taxable income, excluding net capital gains, to its stockholders in order to maintain its qualification as a REIT. The taxability of distributions to stockholders is determined by the Company’s earnings and profits, which differs from net income reported for financial reporting purposes. The estimated taxability of cash distributions to common shareholders is as follows (per common share):


	2015		2014		2013
Ordinary income	$	2.50	$	2.30	$	1.39
Capital gains		0.23		0.17		0.02
Return of capital		—		—		0.09

	$	2.73	$	2.47	$	1.50

The differences between the income tax provision calculated at the statutory U.S. federal income tax rate of 35% and the actual income tax benefit recorded for continuing operations are as follows (amounts in thousands):


	2015			2014			2013
Statutory federal income tax provision	$	(34,774	)	$	(43,750	)	$	(9,035	)
Adjustment for nontaxable income of the REIT		34,904			44,701			32,642
State taxes (net of federal tax benefit and change in valuation allowance)		(1,477	)		950			3,216
Permanent items		(165	)		(160	)		1,092
Federal tax credits		—			112			—
Federal valuation allowance		8,271			(853	)		(3,509	)
Unrecognized tax benefits		—			—			6,261
REIT conversion		—			—			62,063
Effect of federal tax law change		5,229			—			—
Other		(133	)		467			(68	)

	$	11,855		$	1,467		$	92,662

As a result of the Company’s conversion to a REIT, certain net deferred tax liabilities related to the real estate of the Company were reversed, as the REIT will generally not pay federal corporate income tax related to those deferred tax liabilities. In addition, the Company assessed the need for a valuation allowance on the net deferred tax assets of the TRSs. As a result, the Company recorded a net benefit of $64.8 million related to the conversion to a REIT during 2013.

Significant components of the Company’s deferred tax assets and liabilities at December 31 are as follows (amounts in thousands):


	2015			2014
DEFERRED TAX ASSETS:
Accounting reserves and accruals	$	21,174		$	22,023
Defined benefit plan		8,389			7,285
Deferred management rights proceeds		70,483			70,887
Federal and State net operating loss carryforwards		44,932			47,156
Tax credits and other carryforwards		569			1,016
Other assets		7,917			7,953

Total deferred tax assets		153,464			156,320
Valuation allowance		(88,309	)		(98,445	)

Total deferred tax assets, net of valuation allowance		65,155			57,875

DEFERRED TAX LIABILITIES:
Property and equipment, net		63,289			68,047
Goodwill and other intangibles		1,236			1,727
Other liabilities		1,793			2,385

Total deferred tax liabilities		66,318			72,159

Net deferred tax liabilities	$	1,163		$	14,284

Federal net operating loss carryforwards at December 31, 2015 totaled $63.4 million, resulting in a deferred tax benefit of $22.2 million, which will begin to expire in 2032. Charitable contribution carryforwards at December 31, 2015 totaled $1.8 million, resulting in a deferred tax benefit of $0.5 million, which will begin to expire in 2016. The use of certain federal net operating losses, credits and other deferred tax assets are limited to the Company’s future taxable earnings. As a result, a valuation allowance has been provided for certain federal deferred tax assets. The valuation allowance related to federal deferred tax assets increased (decreased) $(8.3) million, $4.3 million and $60.3 million in 2015, 2014 and 2013, respectively. The 2013 increase in the valuation allowance includes the revaluation of the deferred tax assets of the TRSs due to the REIT conversion. State net operating loss carryforwards at December 31, 2015 totaled $439.2 million, resulting in a deferred tax benefit of $22.7 million, which will expire between 2016 and 2035. The use of certain state net operating losses, credits and other state deferred tax assets are limited to the future taxable earnings of separate legal entities. As a result, a valuation allowance has been provided for certain state deferred tax assets, including loss carryforwards. The valuation allowance related to state deferred tax assets increased (decreased) $(1.8) million, $(3.5) million and $19.0 million in 2015, 2014 and 2013, respectively. Management believes that it is more likely than not that the results of operations will generate sufficient taxable income to realize the deferred tax assets after giving consideration to the valuation allowance.

The Company has concluded IRS examinations through the 2010 tax year. For federal income tax purposes and substantially all the states with which the Company has nexus, the statute of limitations has expired through 2011. However, the Company has net operating loss carryforwards from closed years, which could be adjusted upon audit. The Company is routinely subject to other various jurisdictional income tax audits; however, there are no outstanding state or local audits at December 31, 2015.

As a result of the completion of the IRS federal income tax audits through 2010, issues related to 2010 and earlier years have been effectively settled. Due to the favorable resolution of the federal examination, the Company’s reserve for unrecognized tax benefits decreased by $12.3 million during 2013, of which $5.5 million was recorded as an income tax benefit. Due to the expiration of statutes of limitations, the reserve for unrecognized tax benefits decreased an additional $0.8 million during 2013, of which $0.5 million was recorded as an income tax benefit. In addition, the Company recorded a reduction to the related accrued interest of $1.5 million as an income tax benefit in 2013.

At December 31, 2015 and 2014, the Company had no unrecognized tax benefits. A reconciliation of the beginning and ending gross amount of unrecognized tax benefits (exclusive of interest and penalties) for 2013 is as follows:


	2013
Unrecognized tax benefits - January 1, 2013	$	13,162
Reductions due to settlements with taxing authorities		(12,327	)
Reductions due to expiration of certain statute of limitations		(835	)

Unrecognized tax benefits - December 31, 2013	$	—

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company recognized $(2.2) million of interest and no penalties related to uncertain tax positions in the accompanying consolidated statement of operations for 2013. At December 31, 2015 and 2014, the Company has accrued no interest or penalties related to uncertain tax positions.