7. Income Taxes

For federal income tax purposes, as well as for state income tax purposes in the majority of the states in which the Partnership operates, the earnings attributable to the Partnership, as a separate legal entity, and the Operating Partnership are not subject to income tax at the partnership level. With the exception of those states that impose an entity-level income tax on partnerships, the taxable income or loss attributable to the Partnership, as a separate legal entity, and to the Operating Partnership, which may vary substantially from the income (loss) before income taxes reported by the Partnership in the consolidated statement of operations, are includable in the federal and state income tax returns of the individual partners. The aggregate difference in the basis of the Partnership's net assets for financial and tax reporting purposes cannot be readily determined as the Partnership does not have access to each partner's basis in the Partnership.

As described in Note 1 and Note 2, the earnings of the Corporate Entities are subject to corporate level federal and state income tax. However, based upon past performance, the Corporate Entities are currently reporting an income tax provision composed primarily of minimum state income taxes. A full valuation allowance has been provided against the deferred tax assets based upon an analysis of all available evidence, both negative and positive at the balance sheet date, which, taken as a whole, indicates that it is more likely than not that sufficient future taxable income will not be available to utilize the assets. Management's periodic reviews include, among other things, the nature and amount of the taxable income and expense items, the expected timing when assets will be used or liabilities will be required to be reported and the reliability of historical profitability of businesses expected to provide future earnings. Furthermore, management considered tax-planning strategies it could use to increase the likelihood that the deferred tax assets will be realized.

The income tax provision of all the legal entities included in the Partnership's consolidated statement of operations, which is composed primarily of state income taxes in the few states that impose taxes on partnerships and minimum state income taxes on the Corporate Entities, consists of the following:


	Year Ended
	September 29,		September 24,		September 25,
	2012		2011		2010
Current
Federal	$	18	$	135	$	177
State and local		119		749		1,005

		137		884		1,182
Deferred		—		—		—

	$	137	$	884	$	1,182

The provision for income taxes differs from income taxes computed at the United States federal statutory rate as a result of the following:


	Year Ended
	September 29,			September 24,			September 25,
	2012			2011			2010
Income tax provision at federal statutory tax rate	$	706		$	40,548		$	40,361
Impact of Partnership income not subject to federal income taxes		(5,000	)		(39,952	)		(38,808	)
Permanent differences		244			239			2,051
Transfer of assets to Corporate Entities		13,420			-			-
Change in valuation allowance		(8,990	)		(454	)		(4,806	)
State income taxes		(659	)		492			2,247
Other		416			11			137

Provision for income taxes—current and deferred	$	137		$	884		$	1,182

The components of net deferred taxes and the related valuation allowance using currently enacted tax rates are as follows:


	As of
	September 29,			September 24,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	37,256		$	32,938
Allowance for doubtful accounts		652			1,323
Inventory		563			658
Intangible assets		—			1,201
Deferred revenue		2,631			1,303
Derivative instruments		71			71
AMT credit carryforward		1,086			1,086
Other accruals		1,926			1,936

Total deferred tax assets		44,185			40,516

Deferred tax liabilities:
Property, plant and equipment		10,462			314
Intangible assets		2,511			—

Total deferred tax liabilities		12,973			314

Net deferred tax assets		31,212			40,202
Valuation allowance		(31,212	)		(40,202	)

Net deferred tax assets	$	—		$	—

After the Inergy Propane Acquisition, the Partnership contributed all of the Inergy Propane assets and liabilities to the Operating Partnership which, in turn, contributed the fuel oil and refined fuels and service assets and liabilities to the Corporate Entities. At the time of the transfer, the Corporate Entities recognized a deferred tax liability for the difference between the book basis of the assets received and their tax basis. The recognition of that deferred tax liability was offset by the release of a portion of the valuation allowance that previously existed on the net deferred tax assets. Thus, the transfer of these assets had no impact on net income for fiscal 2012.