INCOME TAXES

The operations conducted by the Company’s real estate investment trust (“REIT”) entities are generally not subject to U.S. federal and state income taxation. Non-REIT qualifying operations are conducted by the Company’s taxable REIT subsidiaries. Prior to the June 27, 2014 spin-off of Rayonier Advanced Materials, the Company’s taxable REIT subsidiaries (“TRS”) operations included the Performance Fibers business. As such, during 2014 and prior periods the income tax benefit from continuing operations was significantly impacted by the TRS businesses. Subsequent to the spin-off, the primary businesses performed in Rayonier’s taxable REIT subsidiaries include log trading and certain real estate activities, such as the sale and entitlement of development HBU properties.

Provision for Income Taxes from Continuing Operations

The Company’s effective tax rate is below the 35 percent U.S. statutory rate due to tax benefits associated with being a REIT. The income tax benefit for the three and six months ended June 30, 2015 is principally related to the Matariki Forestry Group joint venture (the “New Zealand JV”). The prior year period’s benefit was due to losses at Rayonier's taxable operations primarily from interest and general administrative expenses not allowed to be allocated to the discontinued operations of the Performance Fibers business and is not comparable to the current year.

The table below reconciles the U.S. statutory rate to the Company’s effective tax rate for each period presented:



	Three Months Ended June 30,
	2015					2014
Income tax (benefit) expense at federal statutory rate		($1,105	)	35.0	%		$6,153		35.0	%
REIT income and taxable losses	1,077			(34.1	)	(5,625		)	(32.0	)
Foreign operations	101			(3.2	)	(728		)	(4.1	)
Net operating loss valuation allowance	(216		)	6.9		—			—
Non-deductible real estate losses	—			—		590			3.4
Other	(153		)	4.8		119			0.6
Income tax (benefit) expense before discrete items		($296	)	9.4	%		$509		2.9	%
CBPC valuation allowance	—			—		15,574			88.7
Spin-off related costs	—			—		797			4.5
Deferred tax inventory valuations	—			—		(3,293		)	(18.7	)
Other	—			—		(31		)	(0.3	)
Income tax (benefit) expense as reported for continuing operations		($296	)	9.4	%		$13,556		77.1	%



	Six Months Ended June 30,
	2015					2014
Income tax expense at federal statutory rate		$5,093		35.0	%		$7,112		35.0	%
REIT income and taxable losses	(6,894		)	(47.4	)	(13,823		)	(69.3	)
Foreign operations	(645		)	(4.4	)	(841		)	(0.3	)
Net operating loss valuation allowance	1,386			9.5		—			—
Non-deductible real estate losses	—			—		681			1.2
Other	292			2.0		138			0.3
Income tax benefit before discrete items		($768	)	(5.3	)%		($6,733	)	(33.1	)%
CBPC valuation allowance	—			—		15,574			76.6
Spin-off related costs	—			—		797			3.9
Deferred tax inventory valuations	—			—		(3,293		)	(16.2	)
Other	—			—		(384		)	(1.9	)
Income tax (benefit) expense as reported for continuing operations		($768	)	(5.3	)%		$5,961		29.3	%

Provision for Income Taxes from Discontinued Operations

On June 27, 2014, Rayonier completed the spin-off of its Performance Fibers business. For the three and six months ended June 30, 2014, income tax expense related to Performance Fibers discontinued operations was $6.0 million and $21.2 million, respectively. See Note 2 — Discontinued Operations for additional information on the spin-off of the Performance Fibers business.