Quarterly report pursuant to Section 13 or 15(d)

INCOME TAXES

v3.2.0.727
INCOME TAXES
6 Months Ended
Jun. 30, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
 
Income tax expense (benefit) consists of the following:
 
 
Three Months Ended June 30,

Six Months Ended June 30,
 
 
2015

2014

2015

2014
Current:
 
 
 
 
 
 
 
 
Federal
 
$
(106
)
 
$
2,236

 
$
630

 
$
2,453

State and Local
 
64

 
1,514

 
(1,092
)
 
1,584

Total Current Income Tax Expense (Benefit)
 
(42
)
 
3,750

 
(462
)
 
4,037

Deferred:
 
 
 
 
 
 
 
 
Federal
 
13,281

 
13,236

 
11,958

 
13,236

State and Local
 
1,067

 
4,409

 
(617
)
 
4,409

Total Deferred Income Tax Expense (Benefit)
 
14,348

 
17,645

 
11,341

 
17,645

Total Income Tax Expense (Benefit)
 
$
14,306

 
$
21,395

 
$
10,879

 
$
21,682


 
New Residential intends to qualify as a REIT for the tax years ending December 31, 2014 and 2015. A REIT is generally not subject to U.S. federal corporate income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements.
 
New Residential operates a securitization vehicle and has made certain investments, particularly its investments in servicer advances (Note 6) and REO (Note 8), through TRSs that are subject to regular corporate income taxes which have been provided for in the provision for income taxes, as applicable. New Residential and its subsidiaries file income tax returns with the U.S. federal government and various state and local jurisdictions beginning with the tax year ending December 31, 2013. Generally, these income tax returns will be subject to tax examinations by tax authorities for a period of three years after the date of filing.

As of December 31, 2014, New Residential recorded an increase to the income tax provision of $2.3 million for unrecognized tax benefits. The reserve for unrecognized tax benefits related to state and local tax positions expected to be taken on the income tax returns. As a result of information received from local tax authorities, New Residential has determined that the reserve for unrecognized tax benefits is no longer needed and has reduced the reserve for unrecognized tax benefits to zero as of March 31, 2015. As a result, New Residential recorded a benefit of $2.3 million to the income tax provision as of March 31, 2015.

On April 6, 2015, as a part of the purchase price allocation related to the HLSS Acquisition (Note 1), New Residential recorded an increase to its deferred tax asset of $186.8 million. The deferred tax asset primarily relates to the difference in the book basis and tax basis of New Residential’s investment in servicer advances. Management believes that such deferred tax asset is more likely than not to be realized and, therefore, no valuation allowance has been recorded against such deferred tax asset as of June 30, 2015.

New Residential has recorded a net deferred tax asset of approximately $159.2 million as of June 30, 2015.