Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Provision for Income Taxes

Note 16.  Income Taxes

Publicly traded partnerships like ours are treated as corporations unless they have 90% or more in “qualifying income” (as that term is defined in the Internal Revenue Code).  We satisfied this requirement in each of the years ended December 31, 2023, 2022 and 2021 and, as a result, are not subject to federal income tax.  However, our partners are individually responsible for paying federal income tax on their share of our taxable income.  Net earnings for financial reporting purposes may differ significantly from taxable income reportable to our unitholders as a result of differences between the tax basis and financial reporting basis of certain assets and liabilities and other factors.  We do not have access to information regarding each partner’s individual tax basis in our limited partner interests.  

Income taxes are accounted for under the asset-and-liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.  Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.  Accounting guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.  We did not rely on any uncertain tax positions in recording our income tax-related amounts during the years ended December 31, 2023, 2022 and 2021.

Tabular Disclosures Regarding Income Taxes

Our federal, state and foreign income tax benefit (provision) is summarized below:

	For the Year Ended December 31,
	2023			2022			2021
Current portion of income tax provision:
Federal	$	(12	)	$	(2	)	$	2
State		(20	)		(18	)		(31	)
Foreign		–			(2	)		(1	)
Total current portion		(32	)		(22	)		(30	)
Deferred portion of income tax provision:
Federal		17			(20	)		(27	)
State		(29	)		(40	)		(13	)
Foreign		–			–			–
Total deferred portion		(12	)		(60	)		(40	)
Total provision for income taxes	$	(44	)	$	(82	)	$	(70	)

A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:

	For the Year Ended December 31,
	2023			2022			2021
Pre-Tax Net Book Income (“NBI”)	$	5,701		$	5,697		$	4,825
Texas Margin Tax (1)		(49	)		(56	)		(42	)
State income tax provision, net of federal benefit		(2	)		(1	)		(1	)
Federal income tax provision computed by applying the       federal statutory rate to NBI of corporate entities		(16	)		(15	)		(13	)
Change in valuation allowance (2)		22			(8	)		(14	)
Other		1			(2	)		–
Provision for income taxes	$	(44	)	$	(82	)	$	(70	)
Effective income tax rate		(0.8	)%		(1.4	)%		(1.5	)%

(1)	Although the Texas Margin Tax is not considered a state income tax, it has the characteristics of an income tax since it is determined by applying a tax rate to a base that considers our Texas-sourced revenues and expenses.
(2)	During 2023, management concluded that it is more likely than not that the deferred tax assets attributable to OTA will be fully realizable.  As a result, for the year-end December 31, 2023, we recorded a full release of the valuation allowance against OTA’s deferred tax assets.

Deferred income taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will  be in effect when these differences reverse.

The following table presents the significant components of deferred tax assets and deferred tax liabilities at the dates indicated:

	December 31,
	2023		2022
Deferred tax liabilities:
Attributable to investment in OTA (1)	$	436	$	406
Attributable to property, plant and equipment		138		133
Attributable to investments in other entities		4		5
Other		83		60
Total deferred tax liabilities		661		604
Deferred tax assets:
Net operating loss carryovers (2)		46		22
Temporary differences related to Texas Margin Tax		4		4
Total deferred tax assets		50		26
Valuation allowance		–		22
Total deferred tax assets, net of valuation allowance		50		4
Total net deferred tax liabilities	$	611	$	600

(1)	Represents the deferred tax liability balance held by our wholly owned subsidiary, OTA, which we acquired in March 2020.
(2)	The loss amount presented as of December 31, 2023 has an indefinite carryover period.  All losses are subject to limitations on their utilization.