Income Taxes

The Company’s TRS is subject to federal and state income tax. In 2016, the company owned 100% of TRS1 and TRS 2 that filed separate income tax returns. The companies merged on April 30, 2016. Beginning on May 1, 2016 the Company's TRS is taxed as one legal entity.

The components of income tax expense for the following periods are as follows (in thousands):



	For the year ended
	December 31,
	2016			2015		2014
Current:
Federal	$	56		$	129	$	82
State	69			131		27
Current tax expense	$	125		$	260	$	109

Deferred:
Federal	(380		)	—		(3		)
State	(46		)	—		(1		)
Deferred tax benefit	(426		)	—		(4		)
Total tax expense (benefit)	$	(301	)	$	260	$	105

The difference between income tax expense and the amount computed by applying the statutory federal income tax rate to the combined income of the Company's TRS before taxes were as follows (in thousands):



	For the year ended
	December 31,
	2016			2015			2014
Book income (loss) before income taxes of the TRS	$	974		$	2,384		$	(520	)

Statutory rate of 34% applied to pre-tax income	$	331		$	810		$	(178	)
Effect of state and local income taxes, net of federal tax benefit	38			97			(14		)
Provision to return adjustment	(406		)	211			40
Permanent adjustments	16			140			—
Change in valuation allowance	(299		)	(998		)	257
Other	19			—			—
Total income tax (benefit) expense	$	(301	)	$	260		$	105

Effective tax rate	(30.90		)%	10.91		%	(20.19		)%

At December 31, 2016, our TRS had a gross deferred tax asset associated with future tax deductions of $0.4 million. The tax effect of each type of temporary difference and carry forward that gives rise to the deferred tax asset as of December 31, 2016 and 2015 are as follows (in thousands):



	For the year ended
	December 31,
	2016			2015
Deferred tax assets:
Allowance for doubtful accounts	$	59		$	36
Accrued compensation	692			489
Total book to tax difference in partnership	(404		)	(356		)
Net operating loss	79			130
Valuation allowance	—			(299		)
Net deferred tax asset	$	426		$	—

As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. As of December 31, 2016, management determined that sufficient positive evidence existed to conclude that it is more likely than not that the net deferred tax asset would be realizable against the current period's earnings, and therefore, released the related valuation allowance in accordance with GAAP for intraperiod tax allocation.