Is the Withdrawal subject to Federal Income Tax or State Taxes?

Yes. We will withhold 10% for Federal Taxes unless you elect to not have any taxes taken out. Regardless, you will receive a 1099 at the end of the year. 

Depending on your state or residence you may be subject to state income taxes.

You have the option to include the income from the withdrawal when you file your federal taxes in equal parts over a three-year period. This would be handled by your accountant or tax professional.