Two Harbors Investment Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes Income Taxes (Tables)

Income Taxes Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The following table summarizes the tax (benefit) provision recorded at the taxable subsidiary level for the years ended December 31, 2016, 2015 and 2014:



	Year Ended
	December 31,
(in thousands)	2016			2015			2014
Current tax (benefit) provision:
Federal	$	(1,630	)	$	(4,027	)	$	6,507
State	167			175			16
Total current tax (benefit) provision	(1,463		)	(3,852		)	6,523
Deferred tax provision (benefit)	13,766			(12,638		)	(80,261		)
Total provision for (benefit from) income taxes	$	12,303		$	(16,490	)	$	(73,738	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The following is a reconciliation of the statutory federal and state rates to the effective rates, for the years ended December 31, 2016, 2015 and 2014:



	Year Ended
	December 31,
	2016					2015					2014
(dollars in thousands)	Amount			Percent		Amount			Percent		Amount			Percent
Computed income tax expense at federal rate	$	127,953		35	%	$	166,502		35	%	$	32,691		35	%
State taxes, net of federal benefit, if applicable	108			—	%	114			—	%	10			—	%
Permanent differences in taxable income from GAAP net income	392			—	%	4,203			1	%	1,636			2	%
Dividends paid deduction	(116,150		)	(32	)%	(187,309		)	(39	)%	(108,075		)	(116	)%
Provision for (benefit from) income taxes/ Effective Tax Rate⁽¹⁾	$	12,303		3	%	$	(16,490	)	(3	)%	$	(73,738	)	(79	)%

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(1)	The provision for (benefit from) income taxes is recorded at the taxable subsidiary level.

Schedule of Current and Deferred Tax Assets and Liabilities [Table Text Block]

The Company’s consolidated balance sheets, as of December 31, 2016 and December 31, 2015 contain the following current and deferred tax liabilities and assets, which are included in other assets, and are recorded at the taxable subsidiary level:



(in thousands)	December 31, 2016			December 31, 2015
Income taxes receivable
Federal income taxes receivable	$	1,532		$	5,216
State and local income taxes receivable	—			—
Income taxes receivable, net	1,532			5,216
Deferred tax assets (liabilities)
Deferred tax asset	111,636			69,441
Deferred tax liability	(54,275		)	(25,123		)
Total net deferred tax assets	57,361			44,318
Total tax assets, net	$	58,893		$	49,534

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Components of the Company’s deferred tax assets as of December 31, 2016 and December 31, 2015 were as follows:



(in thousands)	December 31, 2016			December 31, 2015
Available-for-sale securities	$	17,942		$	(8,673	)
Mortgage servicing rights	(9,492		)	6,363
Derivative assets and liabilities	(42,666		)	(4,492		)
Other assets	24			3
Other liabilities	2,713			978
Intangibles	235			256
Alternative minimum tax credit	1,904			420
Net operating loss carryforward	42,039			8,177
Capital loss carryforward	44,662			41,286
Total net deferred tax assets	$	57,361		$	44,318