Quarterly report pursuant to Section 13 or 15(d)

INCOME TAXES

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INCOME TAXES
9 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
 
The provision for income taxes consists of the following:
 
 
Three Months Ended September 30,

Nine Months Ended September 30,
 
 
2014

2013

2014

2013
Current:
 
 
 
 
 
 
 
 
  Federal
 
$
1,677

 
$

 
$
4,130

 
$

  State and Local
 
1,285

 

 
2,868

 

    Total Current Provision
 
2,962

 

 
6,998

 

Deferred:
 
 
 
 
 
 
 
 
  Federal
 
3,621

 

 
16,857

 

  State and Local
 
1,218

 

 
5,628

 

    Total Deferred Provision
 
4,839

 

 
22,485

 

Total Provision for Income Taxes
 
$
7,801

 
$

 
$
29,483

 
$


 
New Residential intends to qualify as a REIT for the tax years ending December 31, 2013 and 2014. 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 was a wholly owned subsidiary of Newcastle until May 15, 2013 and, as a qualified REIT subsidiary, was a disregarded entity until such date. As a result, no provision or liability for U.S. federal or state income taxes has been included in the accompanying consolidated financial statements for the period from January 1 through May 15, 2013.
 
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. In addition, some investments are held through limited partnership interests which are subject to the New York City unincorporated business tax (“UBT”). Regular corporate income taxes on the TRSs and UBT has been provided for in the provision for income taxes. 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.

New Residential had recorded a deferred tax liability of $22.5 million as of September 30, 2014. This deferred tax liability relates to the unrealized gains of $105.8 million from New Residential's investment in servicer advances.

The increase in the provision for income taxes as of September 30, 2014 is primarily due to an increase in taxable profits subject to corporate income tax rates as well as taxable profits subject to UBT.