INCOME TAXES

We have elected to be taxed as a REIT under the Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our taxable income to our stockholders. As a REIT, we generally will not be subject to corporate level federal income tax on net income that is currently distributed to stockholders.

We have wholly-owned TRS's which are subject to federal and state income taxes. The income generated from the TRS's is taxed at normal corporate rates.

The provision for income taxes results in effective tax rates that differ from federal and state statutory rates. A reconciliation of the provision for income tax attributable to the TRSs' income from continuing operations computed at federal statutory rates to the income tax provision reported in the financial statements is as follows:



	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Income from continuing operations before income taxes for TRSs	$	4,962		$	4,878		$	5,684

Expected federal income tax provision	$	1,042		$	1,658		$	1,933
State income taxes	35			27			21
Change in valuation allowance	—			(37		)	(1,443		)
Other	(152		)	(272		)	1,135
Income tax provision	$	925		$	1,376		$	1,646

The components of our net deferred tax asset, which are included in other assets, are as follows:



	December 31,
	2018			2017
	(in thousands)
Deferred tax assets:
Net operating losses	$	37		$	39
Secured borrowings—government guaranteed loans	198			308
Other	185			111
Total gross deferred tax assets	420			458
Valuation allowance	(38		)	(26		)
	382			432
Deferred tax liabilities:
Loans receivable	(255		)	(333		)
	(255		)	(333		)
Deferred tax asset, net	$	127		$	99

The net operating loss carryforwards at December 31, 2018 and 2017 were generated by TRSs and are available to offset future taxable income of these TRSs. The net operating loss carryforwards expire from 2026 to 2033.

The periods subject to examination for our federal and state income tax returns are 2015 through 2018. As of December 31, 2018 and 2017, no reserves for uncertain tax positions have been established and we do not anticipate any material changes in the amount of unrecognized tax benefits recorded to occur within the next 12 months.

The Tax Cuts and Jobs Act of 2017, signed into law in late December 2017, made sweeping changes to provisions of the Code applicable to businesses. Management has reviewed these statutory changes and determined that the impact to our consolidated financial statements is not material.