A. C. Tyler, K. J. McGlathery and I. C. Anderson. 2001. Macroalgae Mediation of Dissolved Organic Nitrogen Fluxes in a Temperate Coastal Lagoon. Estuarine, Coastal and Shelf Science 53: 155-168.
Basically as I understand it, the algae takes up N for use making things like proteins, but it also needs N for intermediate steps in converting the sugars from photosynthesis into other usable products. After those steps are over, since the N isn't actually consumed in the process, the algae has more N than it needs for actually building things like protein and the extra just gets released back into the water.