Income Taxes

As a result of the Up‑C Transaction, we became the sole managing member of RMR LLC. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. In addition, on June 1, 2015 and June 3, 2015, respectively, RMR Intl and RMR Advisors became wholly owned disregarded subsidiaries of RMR LLC. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its wholly owned subsidiaries.

We had income (loss) before income taxes as follows:



	September 30,
	2016			2015			2014
United States	$	146,978		$	82,377		$	9,308
Foreign	(44		)	(108		)	1,265
Total	$	146,934		$	82,269		$	10,573

We had a provision for income taxes which consists of the following:



	September 30,
	2016		2015		2014
Current:
Federal	$	19,332	$	250	$	—
State	4,445		35		1
Foreign	—		—		279

Deferred:
Federal	699		4,051		—
State	97		512		—
Foreign	—		—		—
Total	$	24,573	$	4,848	$	280

A reconciliation of the statutory income tax rate to the effective tax rate is as follows:



	September 30,
	2016		2015		2014
Income taxes computed at the federal statutory rate	35.00	%	35.00	%	—	%
Permanent items	—	%	0.10	%	0.02	%
Net income attributable to non-controlling interest	(21.37	)%	(29.87	)%	—	%
Foreign taxes	—	%	—	%	3.67	%
State taxes, net of federal benefit	3.09	%	0.67	%	0.01	%
Change in valuation allowance	—	%	—	%	(1.01	)%
Total	16.72	%	5.90	%	2.69	%

For the periods prior to the Up-C Transaction, RMR LLC, RMR Advisors and RMR Intl were not eligible to file consolidated federal, state, or foreign income tax returns under existing tax law. Notwithstanding each separate tax filing requirement, the presentation for the periods prior to the Up-C Transaction represents the combined income tax expense for federal, state and foreign tax purposes.

For the periods prior to the Up-C Transaction, RMR LLC was a single member limited liability company, and it was generally disregarded for federal and most state income tax purposes. For the periods prior to the Up-C Transaction the sole member of RMR LLC was ABP Trust. ABP Trust elected to be treated as an S corporation for income tax purposes and is generally not subject to federal and most state income taxes. RMR LLC and ABP Trust, however, are subject to certain state income taxes. In states where RMR LLC incurs income taxes, it may be subject to audit for tax years ending September 30, 2012 through its most recent filings. For the period October 1, 2014 to June 5, 2015, and the fiscal year ended September 30, 2014, RMR LLC had a provision for income tax expense of $4 and $280, respectively.

For the periods prior to the Up-C Transaction, RMR Advisors elected to be treated as an S corporation for income tax purposes and was also generally not subject to federal and most state income taxes. RMR Advisors was, however, subject to certain state income taxes notwithstanding its S corporation status. RMR Advisors may be subject to audit for tax years ending September 30, 2012 through its most recent filings. For the period ended June 4, 2015 and the fiscal year ended September 30, 2014, RMR Advisors had no provision for income tax expense.

For the periods prior to the Up-C Transaction, RMR Intl was a partnership for U.S. income tax purposes and was not subject to federal and state income tax. RMR Intl conducted business in Australia through a foreign entity that was subject to Australian income tax. RMR Intl, and its foreign subsidiary, may be subject to audit for tax years ending September 30, 2014 through its most recent filings. For the period ended June 4, 2015 and the fiscal year ended September 30, 2014, RMR Intl had no provision for foreign income taxes because RMR Intl has certain offsetting tax losses related to contract termination fees and other business start‑up costs. We have determined that it is likely that RMR Intl may not realize the benefit of its remaining deferred tax assets and, therefore, we maintain a full valuation allowance against our deferred tax assets related to RMR Intl.

As of September 30, 2016 and 2015, we had a net deferred tax asset of $45,819 and $46,614, respectively, which is primarily a result of the Up-C Transaction. For further information about the Up-C Transaction, please refer to Note 6, Related Person Transactions below. The components of the deferred tax assets as of September 30, 2016, 2015 and 2014 are as follows:



	September 30,
	2016			2015			2014
Deferred tax assets:
Termination fee	$	190		$	190		$	286
Organization costs	16			16			23
Outside basis difference	45,819			46,614			—
Total deferred tax assets	46,025			46,820			309
Valuation allowance	(206		)	(206		)	(309		)
Total deferred tax assets	$	45,819		$	46,614		$	—

ASC 740, Income Taxes, provides a model for how a company should recognize, measure and present in its financial statements uncertain tax positions that have been taken or are expected to be taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50.0% likely to be realized upon settlement. As of September 30, 2016, 2015 and 2014, we have no uncertain tax positions.