Income Taxes

Our provision for income taxes consists of the following (in thousands):



	Year Ended December 31,
	2015			2014		2013
Current:
State	$	270		$	350	$	519
Federal	513			—		—
Foreign	2,336			2,772		2,572
	3,119			3,122		3,091

Deferred:
Foreign	(755		)	69		(457		)
	(755		)	69		(457		)

Income tax expense	$	2,364		$	3,191	$	2,634

Federal income tax expense for the year ended December 31, 2015 relates to taxes incurred as a result of a taxable built-in gain triggered by the sale of a property that was previously owned by a C corporation. As a result of the disposition of the Australian properties, we incurred net income tax expense of $1.6 million for the year ended December 31, 2015.

A reconciliation of our effective tax rate and the U.S. Federal statutory income tax rate is as follows:



	Year Ended December 31,
	2015		2014		2013
Taxes at statutory U.S. federal income tax rate	35.00	%	35.00	%	35.00	%
Dividends paid deduction and net operating loss utilization	(35.00	)%	(35.00	)%	(35.00	)%
Federal taxes on built-in gain	0.50	%	—	%	—	%
State, local, and foreign income taxes	1.81	%	11.73	%	(1.71	)%
Effective tax rate	2.31	%	11.73	%	(1.71	)%

Deferred income tax assets and liabilities, net of a valuation allowance, represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and are determined using tax rates expected to be in effect when the deferred income tax assets and liabilities are anticipated to be paid or recovered. At December 31, 2014, we had deferred tax assets of $2.4 million, net of a valuation allowance of $0.6 million, and deferred tax liabilities of $3.1 million, which primarily relate to different carrying amounts for financial reporting and for Australian income tax purposes related to our properties and operations in Australia. The deferred tax assets primarily relate to depreciation differences and the deferred tax liabilities primarily relate to straight line rent adjustments. During the year ended December 31, 2015, we sold our Australian properties (Note 4) and as of December 31, 2015, we do not have any deferred tax assets or liabilities related to our Australian properties. We generated significant net operating losses through the 2015 property sales and we have fully reserved the associated deferred tax assets due to the uncertainty of our ability to utilize the net operating losses in the future.