INCOME TAXES

12 Months Ended

Dec. 31, 2012

INCOME TAXES

NOTE 11. INCOME TAXES

We elected to be taxed as a REIT and operate in a manner that allows us to qualify as a REIT, for federal income tax purposes commencing with our taxable year ending December 31, 2011. As a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. Taxable income from non-REIT activities managed through our TRS is subject to federal and state income taxes.

We lease our hotel property to a wholly owned TRS that is subject to federal and state income taxes. We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between GAAP carrying amounts and their respective tax bases. Additionally, we classify certain state taxes as income taxes for financial reporting purposes in accordance with ASC Topic 740, Income Taxes. We record the Portland Business Tax and Texas Margin Tax as income taxes in our financial statements.

A deferred tax liability is included in our Consolidated Balance Sheets of $0.3 million as of December 31, 2012 in relation to real estate asset basis differences for Alamo Quarry Market and certain elections made in our 2011 return for our TRS. No deferred tax liability was recorded as of December 31, 2011.

The income tax provision included in other income (expense) on the consolidated statement of income is as follows (in thousands):

	Year Ended December 31,  2012		Year Ended December 31,  2011
Current:
Federal	$	361	$	483
State		335		90
Deferred:
Federal	$	118	$	—
State	$	202	$	—
Provision for income taxes	$	1,016	$	573