12. Income Tax

We intend to elect and qualify to be taxed as a real estate investment trust (“REIT”) under Section 856 through 860 of the Internal Revenue Code, commencing with our taxable year ending December 31, 2013. As a REIT, we are not subject to federal corporate income tax on that portion of net income that is currently distributed to our owners. However, our taxable REIT subsidiaries (“TRS”) will generally be subject to federal, state, and local income taxes. Prior to the completion of the IPO, the Predecessor was taxed as a partnership for U.S. federal income tax purposes.

We recorded a tax benefit of $0.3 million for the year ended December 31, 2013, related to the activities of our TRS. The tax benefit was determined using a federal rate of 35% and a combined state rate of 5%.

The components of the income tax benefit are as follows (amounts in thousands):

We recorded a deferred tax liability of $1.8 million for the year ended December 31, 2013, related to the activities of our TRS. Deferred income taxes represent the tax effect from continuing operations of the differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following (amounts in thousands):

The ability to carryforward the NOL of approximately $1.0 million will begin to expire in 2026 for federal tax purposes and during the period from 2016 to 2026 for state tax purposes if not utilized. If our TRS entities were to experience a change in control as defined in Section 382 of the Code, the TRS’s ability to utilize NOL in the years after the change in control would be limited.

No provision for federal or state income taxes has been made for the three months ended December 31, 2012 or for the years ended September 30, 2012 and 2011 in the accompanying consolidated financial statements, since our profits and losses were reported on the Predecessor’s members’ tax returns.

For federal income tax purposes, the cash dividends paid for the year ended December 31, 2013 are characterized as follows:

As our aggregate distributions paid in 2013 exceeded our 2013 taxable earnings and profits, the January 2014 distribution declared in the fourth quarter of 2013 and payable to shareholders of record as of December 30, 2013 will be treated as a 2014 distribution for Federal income tax purposes and is not included in the tax characterization shown above.