NOTE 9 INCOME TAXES

The provision for (benefit from) income taxes for the years ended December 31, 2016, 2015 and 2014 were as follows:


(In thousands)	2016		2015		2014
Current	$	4,752	$	2,849	$	(2,050)
Deferred		113,698		21,152		65,010
Total	$	118,450	$	24,001	$	62,960

Income tax expense is computed by applying the Federal corporate tax rate for the years ended December 31, 2016, 2015 and 2014 and is reconciled to the provision for income taxes as follows:


(In thousands)	2016		2015		2014
Tax at statutory rate on earnings from continuing operations before income taxes	$	112,264	$	52,751	$	13,800
Increase (decrease) in valuation allowance, net		(1,326)		1,742		5,602
State income taxes, net of Federal income tax benefit		4,004		267		1,320
Tax at statutory rate on REIT entity earnings not subject to Federal income taxes		—		—		(512)
Tax (benefit) expense from change in rates, prior period adjustments and other permanent differences		(4,591)		(7,361)		(12,193)
Set up deferred tax liability related to captive REIT		—		—		(1,068)
Non-deductible warrant liability loss (gain)		8,544		(20,412)		21,182
Non-taxable interest income		—		—		18,373
Uncertain tax position (benefit) expense, excluding interest		(407)		(2,483)		2,395
Uncertain tax position interest, net of Federal income tax benefit		(38)		(503)		14,061
Income tax expense	$	118,450	$	24,001	$	62,960

Realization of a deferred tax benefit is dependent upon generating sufficient taxable income in future periods. Our net operating loss carryforwards are currently scheduled to expire in subsequent years through 2036. Some of the net operating loss carryforward amounts are subject to the separate return limitation year rules (“SRLY”). It is possible that in the future we could experience a change in control pursuant to Section 382 that could put limits on the benefit of deferred tax assets. On February 27, 2012, we entered into a Section 382 Rights Agreement, with a three-year term, to protect us from such an event and protect our deferred tax assets. On February 26, 2015, the Board of Directors extended the term of the Section 382 Rights Agreement to March 14, 2018 and our stockholders approved the terms on May 21, 2015.

As of December 31, 2016, the amounts and expiration dates of operating loss and tax credit carryforwards for tax purposes are as follows:


			Expiration
(In thousands)	Amount		Date
Net operating loss carryforwards - Federal	$	33,820	2024-2036
Net operating loss carryforwards - State		215,572	2017-2036
Capital loss carryfoward		—	n/a
Tax credit carryforwards - Federal AMT		5,010	n/a

As of December 31, 2016 and 2015, we had gross deferred tax assets totaling $294.5 million and $327.4 million, and gross deferred tax liabilities of $476.8 million and $396.6 million, respectively. We have established a valuation allowance in the amount of $18.6 million and $20.0 million as of December 31, 2016 and 2015, respectively, against certain deferred tax assets for which it is more likely than not that such deferred tax assets will not be realized.

The tax effects of temporary differences and carryforwards included in the net deferred tax liabilities at December 31, 2016 and 2015 are summarized as follows:


(In thousands)	2016		2015
Deferred tax assets:
Operating and Strategic Developments properties, primarily differences in basis of assets and liabilities	$	208,862	$	213,090
Interest deduction carryforwards		54,759		79,781
Operating loss and tax credit carryforwards		30,866		34,499
Total deferred tax assets		294,487		327,370
Valuation allowance		(18,635)		(19,960)
Total net deferred tax assets	$	275,852	$	307,410
Deferred tax liabilities:
Property associated with MPCs, primarily differences in the tax basis of land assets and treatment of interest and other costs	$	(262,572)	$	(218,842)
Operating and Strategic Developments properties, primarily differences in basis of assets and liabilities		(40,915)		(42,860)
Deferred income		(173,310)		(134,929)
Total deferred tax liabilities		(476,797)		(396,631)
Total net deferred tax liabilities	$	(200,945)	$	(89,221)

The deferred tax liability associated with the MPCs is largely attributable to the difference between the basis and value determined as of the date of the acquisition by our predecessors in 2004 adjusted for sales that have occurred since that time. The cash cost related to this deferred tax liability is dependent upon the sales price of future land sales and the method of accounting used for income tax purposes. The deferred tax liability related to deferred income is the difference between the income tax method of accounting and the financial statement method of accounting for prior sales of land in our MPCs.

Although we believe our tax returns are correct, the final determination of tax examinations and any related litigation could be different from what was reported on the returns. In our opinion, we have made adequate tax provisions for years subject to examination. Generally, we are currently open to audit under the statute of limitations by the Internal Revenue Service as well as state taxing authorities for the years ended December 31, 2013 through 2015.

We apply the generally accepted accounting principle related to accounting for uncertainty in income taxes, which prescribes a recognition threshold that a tax position is required to meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.

We recognize and report interest and penalties, if applicable, within our provision for income tax expense. We recognized potential interest expense related to the unrecognized tax benefits of zero, $0.1 million and $21.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, we had no unrecognized tax benefits. At December 31, 2015 and 2014, we had total unrecognized tax benefits of $36.5 million and $184.2 million, respectively, excluding interest, of which none would impact our effective tax rate. A reconciliation of the change in our unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 is as follows:


(In thousands)	2016		2015		2014
Unrecognized tax benefits, opening balance	$	36,524	$	184,200	$	90,532
Gross increases - tax positions in prior period		—		—		93,668
Gross decreases - tax positions in prior periods		(36,524)		(147,676)		—
Unrecognized tax benefits, ending balance	$	—	$	36,524	$	184,200

The reduction in unrecognized tax benefits of $36,524 between the period December 31, 2015 and December 31, 2016 was the result of our filing a request with the IRS to change our tax accounting method related to a subsidiary from an impermissible accounting method to a permissible accounting method which we expect to be approved. The reduction in unrecognized tax benefits of $147,676 between the period December 31, 2014 and December 31, 2015 relates primarily to a payment we made to the IRS as a result of losing our appeal before the tax court where we were denied the right to use the completed contract method for tax accounting on certain long-term contracts.

Periodically we make payments to taxing jurisdictions that reduce our uncertain tax benefits but are not included in the reconciliation above, as the position is not yet settled. The amount of such payments that reduced our uncertain tax benefit was zero at December 31, 2016, zero at December 31, 2015 and $144.1 million at December 31, 2014. As of December 31, 2016, there are no unrecognized tax benefits.