3. Non-controlling Interest

RE/MAX Holdings is the sole managing member of RMCO and subsequent to the IPO, began to operate and control all of the business affairs of RMCO. As a result, RE/MAX Holdings began to consolidate RMCO on October 7, 2013 and because RE/MAX Holdings and RMCO are entities under common control, such consolidation has been reflected for all periods presented. RE/MAX Holdings owns a 39.89% and 39.56% minority economic interest in RMCO as of December 31, 2014 and 2013, respectively, and records a non-controlling interest for the remaining 60.11% and 60.44% economic interest in RMCO held by RIHI as of December 31, 2014 and 2013, respectively. RE/MAX Holdings’ minority economic interest in RMCO increased due to the increase in common units from the issuance of shares of Class A common stock upon the exercise of 135,000 stock options and the vesting of 55,589 restricted stock units during 2014, offset by the cancellation of 30,519 common units in RMCO in May 2014, as discussed in Note 12, Equity-Based Compensation. RE/MAX Holdings’ only sources of cash flow from operations are distributions from RMCO and management fees received pursuant to the management services agreement between RE/MAX Holdings and RMCO. Net income attributable to the non-controlling interest in the accompanying Consolidated Statements of Income represents the portion of earnings attributable to the economic interest in RMCO held by the non-controlling unitholders. As of October 7, 2013, the non-controlling interest in the accompanying Consolidated Balance Sheets represented the carryover basis of RIHI’s capital account in RMCO. Prospectively, the non-controlling interest has been adjusted to reflect tax and other cash distributions made to, and the income allocated to, the non-controlling unitholders. The ownership of the common units in RMCO is summarized as follows:

	As of December 31,
	2014					2013
	Shares		Ownership %			Shares		Ownership %
Non-controlling unitholders ownership of common units in RMCO		17,734,600		60.11	%		17,734,600		60.44	%
RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO)		11,768,041		39.89	%		11,607,971		39.56	%
		29,502,641		100.00	%		29,342,571		100.00	%

The aforementioned ownership percentages are used to calculate the net income attributable to RE/MAX Holdings. A reconciliation from “Income before provision for income taxes” to “Net income attributable to RE/MAX Holdings, Inc.” for the periods indicated is detailed as follows (in thousands, except percentages):

	Year Ended December 31, 2014			Period from October 7 through December 31, 2013
Income before provision for income taxes	$	53,927		$	6,048
Weighted average ownership percentage of controlling interest		39.57	%		39.56	%
Income before provision for income taxes attributable to RE/MAX Holdings, Inc.		21,339			2,393
Provision for income taxes attributable to RE/MAX Holdings, Inc.		(7,903	)		(887	)
Net income attributable to RE/MAX Holdings, Inc.	$	13,436		$	1,506

A reconciliation of the “Provision for income taxes” for the periods indicated is detailed as follows (in thousands):

	Year Ended December 31, 2014			Period from October 7 through December 31, 2013
Provision for income taxes attributable to RE/MAX Holdings, Inc. (a)	$	(7,903	)	$	(887	)
Provision for income taxes attributable to entities other than RE/MAX Holdings, Inc. (b)		(2,045	)		(184	)
Provision for income taxes	$	(9,948	)	$	(1,071	)

(a)

The provision for income taxes attributable to RE/MAX Holdings includes all U.S. federal and state income taxes as well as RE/MAX Holdings’ approximate 40% share of the taxes imposed directly on RE/MAX, LLC, a wholly-owned subsidiary of RMCO, related to tax liabilities in certain foreign jurisdictions of approximately $1,339,000 for the year ended December 31, 2014 and $120,000 for the period from October 7, 2013 through December 31, 2013.

(b)	The provision for income taxes attributable to entities other than RE/MAX Holdings represents taxes imposed directly on RE/MAX, LLC related to tax liabilities in certain foreign jurisdictions that are allocated to the non-controlling interest.

Distributions and Other Payments to Non-controlling Unitholders

Distributions for Taxes

As a limited liability company (treated as a partnership for income tax purposes), RMCO does not incur significant federal or state and local income taxes, as these taxes are primarily the obligations of the members of RMCO. As authorized by the New RMCO, LLC Agreement, RMCO is required to distribute cash, generally, on a pro rata basis, to its members to the extent necessary to cover the members’ tax liabilities, if any, with respect to their allocable share of RMCO earnings. RMCO makes such tax distributions to its members based off an estimated tax rate which is calculated at 46.2% for RMCO’s 2014 tax year and is based on the terms of the New RMCO, LLC Agreement. Upon completion of its tax returns with respect to the prior year, RMCO may make true-up distributions to its members, if cash is available for such purposes, with respect to actual taxable income for the prior year. Distributions for taxes paid to or on behalf of non-controlling unitholders under the New RMCO, LLC Agreement were $17,765,000 during the year ended December 31, 2014, and are recorded in “Non-controlling interest” in the accompanying Consolidated Balance Sheets and Consolidated Statement of Redeemable Preferred Units and Stockholders’ Equity/Members’ Equity. For the years ended December 31, 2013 and 2012, distributions for taxes to RMCO’s non-controlling unitholders were also required, but calculated differently, in accordance with the Old RMCO, LLC Agreement. Distributions for taxes paid to non-controlling unitholders under the Old RMCO, LLC Agreement during the years ended December 2013 and 2012 were $19,614,000 and $3,479,500, respectively.

Other Distributions

Cash distributions are also made to non-controlling unitholders based on their ownership percentage in RMCO as determined in accordance with the New RMCO, LLC Agreement. Future cash distributions will be made to non-controlling unitholders pro rata on a quarterly basis equal to the anticipated dividend payments to the holders of the Company’s Class A common stock. The Company made distributions of $4,432,000 to non-controlling unitholders during the year ended December 31, 2014, which are recorded in “Non-controlling interest” in the accompanying Consolidated Balance Sheets and Consolidated Statement of Redeemable Preferred Units and Stockholders’ Equity/Members’ Deficit. On March 11, 2015, the Company declared a distribution to non-controlling unitholders of $28,819,000, which is payable on April 8, 2015. Cash distributions were also required to be made to non-controlling unitholders in accordance with the Old RMCO, LLC Agreement in an amount equal to the lesser of (1) the amount of excess cash flow payment required to be paid as a mandatory prepayment pursuant to the Company’s previous senior secured credit facility and (2) $8,000,000. Other distributions paid to non-controlling unitholders during the years ended December 31, 2013 and 2012 were $8,000,000 and $6,123,500, respectively.

Payments Pursuant to the Tax Receivable Agreements

As of December 31, 2014, the Company has reflected a liability of $67,418,000, representing the payments due to the Historical Owners under the TRAs (see current and non-current portion of “Payable pursuant to tax receivable agreements” in the accompanying Consolidated Balance Sheets).

During the year ended December 31, 2014, the Company paid $986,000 to the Historical Owners pursuant to the TRAs. As of December 31, 2014, the Company estimates that amounts payable pursuant to the TRAs within the next 12 month period will be approximately $3,914,000. To determine the current amount of the payments due to the Historical Owners, the Company estimated the amount of taxable income that RE/MAX Holdings generated during 2014 and the amount of the specified deductions subject to the TRA which are expected to be realized by RE/MAX Holdings in its 2014 tax return. This amount was then used as a basis for determining the Company’s increase in estimated tax cash savings as a result of such deductions on which a current TRA obligation became due (i.e. payable within twelve months of the Company’s year-end). These calculations are performed pursuant to the terms of the TRAs.

Payments are anticipated to be made under the TRAs indefinitely. The payments are to be made in accordance with the terms of the TRAs. The timing of the payments is subject to certain contingencies including RE/MAX Holdings having sufficient taxable income to utilize all of the tax benefits defined in the TRAs. If the Company elects to terminate the TRAs early, the Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRAs, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits.

Obligations pursuant to the TRAs are obligations of RE/MAX Holdings. They do not impact the non-controlling interest. These obligations are not income tax obligations and have no impact on the tax provision or the allocation of taxes. In general, items of income, gain, loss and deduction are allocated on the basis of members’ ownership interests pursuant to the New RMCO, LLC Agreement after taking into consideration all relevant sections of the Internal Revenue Code.