INCOME TAXES
 12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 24 - INCOME TAXES
The Company operates in such a manner as to quality as a REIT, under the provisions of the Internal Revenue Code of 1986, as amended (the "Code"); therefore, applicable REIT taxable income is included in the taxable income of its shareholders, to the extent distributed by the Company. To maintain REIT status for federal income tax purposes, the Company is generally required to distribute at least 90% of its REIT taxable income to its shareholders as well as comply with certain other qualification requirements as defined under the Code. As a REIT, the Company is not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.
Taxable income from non-REIT activities managed primarily through the Company's taxable REIT subsidiaries is subject to federal, state and local income taxes. The Company's taxable REIT subsidiaries' income taxes are accounted for under the asset and liability method.  Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and tax basis of assets and liabilities.
The following table details the components of income taxes (in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
2013
Provision (benefit) for income taxes:
 
 
 
 
 
Current:
 
 
 
 
 
Federal
$
1,705

 
$
6,819

 
$
4,601

State
430

 
2,505

 
1,068

Total current
2,135

 
9,324

 
5,669

 
 
 
 
 
 
Deferred:
 
 
 
 
 
Federal
(1,007
)
 
(9,450
)
 
(5,116
)
State
617

 
(2,086
)
 
(1,594
)
Total deferred
(390
)
 
(11,536
)
 
(6,710
)
Income tax provision (benefit)
$
1,745

 
$
(2,212
)
 
$
(1,041
)


A reconciliation of the income tax benefit (provision) based upon the statutory tax rate to the effective income tax rate is as follows (in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
2013
Statutory tax
$
361

 
$
(2,232
)
 
$
(588
)
State and local taxes, net of federal benefit
704

 
(375
)
 
(728
)
Permanent adjustments
149

 
41

 
2

True-up of prior period tax expense
530

 
353

 
253

Other items
1

 
1

 
20

 
$
1,745

 
$
(2,212
)
 
$
(1,041
)


The components of deferred tax assets and liabilities are as follows (in thousands):
 
December 31,
 
2015
 
2014
Deferred tax assets related to:
 
 
 
Investment in securities
$
1,657

 
$
1,030

Intangible assets basis difference
—

 
2,533

Federal, state and local loss carryforwards
11,156

 
7,848

Bad debt for reserves
208

 
—

Reserve on MSR valuation
222

 
—

Deferred revenue
—

 
207

Accrued expenses
895

 
56

Amortization of intangibles
3,182

 
766

Unrealized gains/losses
1,725

 
1,799

Mark to market adjustment
—

 
188

Charitable contribution carryforwards
6

 
6

CLCO carryforwards
1,826

 
—

Foreign exchange gain (loss)
156

 
—

Equity compensation
34

 
167

Gain (loss) on sale of investments
—

 
116

Partnership investment
1,965

 
(1,622
)
Total deferred tax assets
23,032

 
13,094

Valuation allowance
—

 
—

Total deferred tax assets
$
23,032

 
$
13,094

 
 
 
 
Deferred tax liabilities related to:
 
 
 
Unrealized gain (loss) on investments
$
(951
)
 
$
(366
)
Amortization of intangibles
(6,319
)
 
—

Gain (loss) on sale of investments
(1,389
)
 
—

Depreciation
(80
)
 
(1
)
Accrued expenses
—

 
(3
)
Deferred revenue
(2
)
 
—

Partnership investment
(1,645
)
 
(90
)
Total deferred tax liabilities
$
(10,386
)
 
$
(460
)
 
 
 
 
Deferred tax assets, net
$
12,646

 
$
12,634



Apidos CDO I, Apidos CDO III, Apidos Cinco CDO, Apidos CLO VIII, Whitney CLO I, Harvest CLO VII, Moselle CLO, Harvest CLO VIII, Harvest X Investor, Harvest CLO X, and Harvest CLO XV Designated Activity Company, the Company's foreign TRSs, are organized as exempted companies incorporated with limited liability under the laws of the Cayman Islands and, with respect to Moselle CLO, Luxembourg and, with respect to Harvest CLO VII, Harvest CLO VIII, Harvest CLO X, and Harvest CLO XV Designated Activity Company, Ireland, and are generally exempt from federal and state income tax at the corporate level because their activities in the United States are limited to trading in stock and securities for their own account.  Therefore, despite their status as TRSs, they generally will not be subject to corporate tax on their earnings and no provision for income taxes is required; however, because they are “controlled foreign corporations,” the Company will generally be required to include Apidos CDO I's, Apidos CDO III's, Apidos Cinco CDO's, Apidos CLO VIII's, Whitney CLO I's, Harvest CLO VII’s, Moselle CLO’s, Harvest CLO VIII’s, Harvest X Investor’s, Harvest X CLO’s and Harvest XV Designated Activity Comoany's current taxable income in its calculation of REIT taxable income.
On October 27, 2011 the Company reorganized the ownership structure of Apidos CDO I and Apidos CDO III. As a result, the earnings from Apidos CDO I and Apidos CDO III are excluded from the Company's calculation of REIT taxable income and are subject to corporate tax. On January 24, 2012, the Company again reorganized the ownership structure of Apidos CDO I and Apidos CDO III.  As a result, for the period January 1, 2012 through January 23, 2012, the earnings from Apidos CDO I and Apidos CDO III are excluded from the Company's calculation of REIT taxable income and are subject to corporate tax. For the period January 24, 2012 through December 31, 2012 the earnings from Apidos CDO I are included in the Company's calculation of REIT taxable income. On December 11, 2012, the Company further reorganized the ownership structure of Apidos CDO III.  As a result, for the period from January 24, 2012 through December 10, 2012 the earnings from Apidos CDO III are included in the Company's calculation of REIT taxable income.  Also as a result of the reorganization on December 11, 2012, for the period December 11, 2012 through December 31, 2012, the earnings from Apidos CDO III are excluded from the Company's calculation of REIT taxable income and are subject to corporate tax.
On November 12, 2012, the Company reorganized the ownership structure of Apidos Cinco CDO and Whitney CLO I.  As a result, for the period November 12, 2012 through December 31, 2012, the earnings from Apidos Cinco CDO and Whitney CLO I are excluded from the Company's calculation of REIT taxable income and are subject to corporate tax. Accordingly, a provision for income taxes on the earnings from November 12, 2012 through December 31, 2012 has been recorded.
On February 13, 2013, the Company reorganized the ownership structure of Apidos Cinco CDO and Whitney CLO I. As a result, for the period January 1, 2013 through February 12, 2013, the earnings from Apidos Cinco CDO and Whitney CLO I are excluded from the Company’s calculation of REIT taxable income and are subject to corporate tax. Accordingly, a provision for income taxes on the earnings from January 1, 2013 through February 12, 2013 has been recorded. Also as a result of the reorganization on February 13, 2013, for the period February 13, 2013 and ending December 31, 2013 the earnings from Apidos Cinco CDO and Whitney CLO I are included in the Company’s calculation of REIT taxable income.
On March 8, 2013 the Company reorganized the ownership structure of Apidos CDO III. As a result, the earnings from Apidos CDO III for the period January 1, 2013 through March 7, 2013 are excluded from the Company’s calculation of REIT taxable income and are subject to corporate tax. Accordingly, a provision for income taxes on the earnings from January 1, 2013 through March 7, 2013 has been recorded. Also as a result of the reorganization on March 8, 2013, for the period March 8, 2013 and ending December 31, 2013 the earnings from Apidos CDO III are included in the Company’s calculation of REIT taxable income.
On September 10, 2013, the Company acquired approximately 9.5% of the equity of Harvest CLO VII, which is a foreign TRS, organized as an exempt company incorporated with limited liability under the laws of Ireland. This equity is directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earnings are included in the Company’s calculation of REIT taxable income.
On February 24, 2014, the Company acquired approximately 88.6% of the equity of Moselle CLO S.A., which is a foreign TRS, incorporated in Luxembourg. This equity is directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earnings are included in the Company’s calculation of REIT taxable income.
On March 27, 2014, the Company acquired approximately 12.6% of the equity of Harvest CLO VIII, which is a foreign TRS, organized as an exempt company incorporated with limited liability under the laws of Ireland. This equity is directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earnings are included in the Company’s calculation of REIT taxable income.
On July 3, 2014, the Company acquired approximately 55% of the equity of Harvest X Investor, which is a foreign TRS, organized as an exempt company incorporated with limited liability under the laws of the Cayman Islands. As of November 6, 2014, the Company’s investment was returned and the Company no longer has an active ownership interest in Harvest X Investor. For the period July 3, 2014 through November 6, 2014 the equity was directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earnings are included in the Company’s calculation of REIT taxable income.
On November 6, 2014, the Company acquired approximately 32.1% of the equity of Harvest CLO X, which is a foreign TRS, organized as an exempt company incorporated with limited liability under the laws of Ireland. This equity is directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earnings are included in the Company’s calculation of REIT taxable income.
On September 28, 2015, the Company acquired 100.0% of the equity of Harvest CLO XV Designated Activity Company, which is a foreign TRS, organized as an exempt company incorporated with limited liability under the laws of Ireland.  This equity is directly owned by a domestic qualified REIT subsidiary of the Company and, accordingly, its earning are included in the Company’s calculation of REIT taxable income.  In December 2015, a third party purchased a piece of the equity, decreasing our ownership to 66.0%.
Effective January 1, 2007, the Company adopted the provisions of FASB's guidance for uncertain tax positions. This implementation did not have an impact on the Company's consolidated balance sheets or consolidated statements of income. The guidance prescribes that a tax position should only be recognized if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority. A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company is required to disclose its accounting policy for classifying interest and penalties, the amount of interest and penalties charged to expense each period as well as the cumulative amounts recorded in the consolidated balance sheets. The Company will continue to classify any tax penalties as other operating expenses and any interest as interest expense. The Company does not have any unrecognized tax benefits that would affect the Company's financial position.
As of December 31, 2015, the Company had $29.7 million of gross federal and $74.7 million of gross state and local net operating tax loss carryforwards ("NOLs"), respectively, or $104.4 million (deferred tax asset of $11.2 million) in total that will begin to expire in 2032.  Management believes it is more likely than not that the Company will be able to utilize all of these NOLs during the respective loss carry forward periods based on tax planning strategies that will generate future taxable income. As such, a valuation allowance has not been established against these deferred tax assets.  Management will continue to assess the need for a valuation allowance in future periods.
As of December 31, 2015, income tax returns for the calendar years 2012 - 2015 remain subject to examination by IRS and/or any state or local taxing jurisdiction. The Company has not executed any agreements with the IRS or any state and/or local taxing jurisdiction to extend a statue of limitations in relation to any previous year.