Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes [Abstract]

Income Taxes

Note 15.  Income Taxes

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.  We did not rely on any uncertain tax positions in recording our income tax-related amounts during the first quarters of 2024 and 2023.

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

	For the Three Months Ended March 31,
	2024			2023
Current portion of income tax provision:
Federal	$	–		$	4
State		(12	)		(11	)
Total current portion		(12	)		(7	)
Deferred portion of income tax provision:
Federal		(4	)		(7	)
State		(5	)		4
Total deferred portion		(9	)		(3	)
Total provision for income taxes	$	(21	)	$	(10	)

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 Three Months Ended March 31,
	2024			2023
Pre-Tax Net Book Income (“NBI”)	$	1,504		$	1,432
Texas Margin Tax (1)		(17	)		(6	)
State income tax provision, net of federal benefit		–			(1	)
Federal income tax provision computed by applying the federal  statutory rate to NBI of corporate entities		(3	)		(3	)
Other		(1	)		–
Provision for income taxes	$	(21	)	$	(10	)
Effective income tax rate		(1.4	)%		(0.7	)%

(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.

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

	March 31,		December 31,
	2024		2023
Deferred tax liabilities:
Attributable to investment in OTA (1)	$	441	$	436
Attributable to property, plant and equipment		143		138
Attributable to investments in other entities		5		4
Other		83		83
Total deferred tax liabilities		672		661
Deferred tax assets:
Net operating loss carryovers (2)		48		46
Temporary differences related to Texas Margin Tax		4		4
Total deferred tax assets		52		50
Total net deferred tax liabilities	$	620	$	611

(1)	Represents the deferred tax liability balance held by our wholly owned subsidiary, OTA Holdings, Inc. ("OTA"), which we acquired in March 2020.
(2)	The loss amount presented as of March 31, 2024 has an indefinite carryover period.  All losses are subject to limitations on their utilization.