10. Income Tax

We recorded a tax expense of $0 million for the years ended December 31, 2015, 2014 and 2013, respectively, related to the activities of our TRS. The income tax expense and benefits recorded were determined using a federal rate of 35% and a combined state rate, net of federal benefit, of 5%. The effective tax rate for the TRS for the year ended December 31, 2015, was (1)%, which is below the combined statutory tax rate of 40% primarily due to the establishment of a valuation allowance of approximately $2 million related to income statement items. The effective tax rate for the TRS for the year ended December 31, 2014, was 0%, which is below the combined statutory tax rate of 40% primarily as a result of the release of a valuation allowance of approximately $2.5 million.

During 2014, we transferred an asset to our TRS that had a tax basis in excess of its book basis. We recognized a deferred tax asset for the amount we expect to be realizable. Because the transfer was done amongst entities under common control, we recorded the $1.9 million impact of the transaction to additional paid in capital.

We recorded a deferred tax liability of $0 million as of December 31, 2015 and 2014, respectively, related to the activities of our TRS. Our deferred tax liability is included in Accounts payable, accrued expenses and other on our consolidated balance sheet. Deferred income taxes represent the tax effect from continuing operations of the differences between the book and tax basis of assets and liabilities, and for equity-based compensation it represents the impact of the vesting of restricted stock. Deferred tax assets (liabilities) include the following as of December 31:

The ability to carryforward our NOL of approximately $23 million will begin to expire in 2034 for federal and state tax purposes if not utilized. If our TRS entities were to experience a change in control as defined in Section 382 of the Internal Revenue Code, the TRS’s ability to utilize NOL in the years after the change in control would be limited.

We have no examinations in progress, none are expected at this time, and years 2012 through 2014 are open. As of December 31, 2015 and 2014, we had no uncertain tax positions. Our policy is to recognize interest expense and penalties related to income tax matters as a component of other expense. There was no accrued interest and penalties as of December 31, 2015 and 2014, and no interest and penalties were recognized during 2015, 2014, or 2013.

For federal income tax purposes, the cash dividends paid for the years ended December 31, 2015 and 2014 are characterized as follows:

As our aggregate distributions paid in 2015 and 2014 exceeded our taxable earnings and profits for such year: