Trinity Place Holdings Inc.

NOTE 5 - TAXES

The provision for taxes is as follows (dollars in thousands):

	Year Ended December 31, 2017		Year Ended December 31, 2016		For the Period March 1, 2015 to December 31. 2015

Current:
Federal	$	-	$	-	$	-
State		38		26		41
	$	38	$	26	$	41
Deferred:
Federal	$	(3,182)	$	-		-
State		-		-	$	-
	$	(3,182)	$	-	$	-

Tax (benefit) expense	$	(3,144)	$	26	$	41

The following is a reconciliation of income taxes computed at the U.S. Federal statuary rate to the provision for income taxes:

	Year Ended December 31, 2017			Year Ended December 31, 2016			For the Period March 1, 2015 to December 31. 2015

Statuary federal income tax rate		35.0	%		35.0	%		35.0	%
State taxes		-0.7	%		7.5	%		16.2	%
Permanent non-deductible expenses		-10.5	%		-6.9	%		-7.4	%
Federal rate change		-654.5	%		0.0	%		0.0	%
AMT credit calculation allowance release		61.6	%		0.0	%		0.0	%
Change of valuation allowance		630.0	%		-35.7	%		-44.4	%

Effective income tax rate		60.9	%		-0.1	%		-0.6	%

The composition of our deferred tax assets and liabilities is as follows (dollars in thousands):

	Year Ended December 31, 2017		Year Ended December 31, 2016

Deferred tax assets:
Pension costs	$	1,008	$	1,801
Stock-based compensation reserves not currently deductible		(147)		(220)
Net operating loss carry forwards		56,462		88,968
Depreciation (including air rights)		1,796		1,685
AMT Credit		-		3,181
Investment in joint venture		254		-
Accrued expenses		220		212

Total deferred tax assets	$	59,593	$	95,627
Valuation allowance		(59,469)		(95,327)
Deferred tax asset after valuation allowance	$	124	$	300

Deferred tax liabilities:
Intangibles	$	(124)	$	(300)
Other		-		-
Total deferred tax liabilities	$	(124)	$	(300)
Net deferred tax assets	$	-	$	-

Current deferred tax assets	$	-	$	-
Long term deferred tax assets		-		-
Total deferred tax assets	$	-	$	-

Effects of the Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into U.S. law. ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018.

Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin ("SAB") No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended prior to the one year term when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Cuts and Jobs Act.

As part of the Tax Reform, the U.S. corporate income tax rate applicable to us decreased from 35% to 21%. This rate change resulted in the remeasurement of our net deferred tax asset (“DTA”) as of December 31, 2017. The effect was approximately $33.7 million, which was completely offset by a change in our valuation allowance.

Pursuant to the Tax Reform, alternative minimum tax (“AMT”) credit carryforwards will be eligible for a 50% refund through tax years 2018 through 2020. Beginning in tax year 2021, any remaining AMT credit carryforwards would be 100% refundable. As a result of these new regulations, we have released our valuation allowance of $3.1 million formerly reserved against our AMT credit carryforwards. We have recorded a tax benefit and refund receivable of $3.1 million in connection with this valuation allowance release.

Our accounting for the above elements of the Act is complete.

Other significant provisions that are not yet effective but may impact income taxes in future years include, but not limited to, an exemption from U.S. tax on dividends of future foreign earnings, limitation on the current deductibility of net interest expense in excess of 30% of adjusted taxable income and a limitation of net operating losses generated after fiscal 2018 to 80% of taxable income.

At December 31, 2017, we had federal NOLs carry forwards of approximately $231.0 million. These NOLs will expire between 2029 and 2037. At December 31, 2017, we also had state NOL carry forwards of approximately $102.3 million. These NOL’s expire between 2029 and 2037. We also had the New York State and New York City prior net operating loss conversion (“PNOLC”) subtraction pools of approximately $31.1 million and $25.5 million, respectively. The conversion to the PNOLC under the New York State and New York City corporate tax reforms does not have any material tax impact.

Based on management’s assessment, it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategies. Accordingly a valuation allowance of $95.3 million was recorded as of December 31, 2016. The valuation allowance was adjusted by approximately $35.8 million during the year ended December 31, 2017 to $59.5 million, mainly as a result of the change in federal income tax rate applicable to corporations from 35% to 21% effective for 2018.