Income Taxes

The operations of a partnership are generally not subject to income taxes because its income is taxed directly to its partners, except as discussed below.

The activities of the Blending and Packaging Assets prior to the acquisition by the Partnership were subject to federal and state income taxes. Accordingly, income taxes have been included in the Blending and Packaging Assets' operating results from January 1, 2010 through October 2, 2012. Related payables/receivables are included in “Due to affiliates” and “Other current assets”, respectively, in the Consolidated Balance Sheet.

Woodlawn, a subsidiary of the Partnership, was subject to income taxes due to its corporate structure. The assets of Woodlawn were sold July 31, 2012 and the corporation was liquidated December 31, 2012. Income tax expense related to Woodlawn is recorded in discontinued operations. A current federal income tax expense of $0, $8,681 and $11, related to the operation of the subsidiary, was recorded for the years ended December 31, 2013, 2012 and 2011, respectively.

The Partnership established deferred income taxes of $8,964 associated with book and tax basis differences of the acquired Woodlawn assets and liabilities at the date of acquisition. The basis differences related primarily to property, plant and equipment. A deferred tax benefit of $0, $7,657 and $139 related to the Woodlawn basis differences was recorded for the years ended December 31, 2013, 2012 and 2011, respectively. A deferred tax expense of $0, $402, and $622 related to the Cross basis differences was recorded for the years ended December 31, 2013, 2012 and 2011. No deferred tax liability related to these basis differences existed at December 31, 2013 and 2012, respectively. The deferred tax liability related to the Prism Assets was reversed upon the sale of those assets as discussed further in Note 5.

Effective January 1, 2007, the Partnership became subject to the Texas margin tax, which is considered a state income tax, and is included in income tax expense on the Consolidated Statements of Operations. The Texas margin tax restructured the state business tax by replacing the taxable capital and earned surplus components of the existing franchise tax with a new “taxable margin” component. Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed as an income tax and, therefore, the recognition of deferred taxes applies to the margin tax. The impact on deferred taxes as a result of this provision is immaterial. State income taxes attributable to the Texas margin tax of $753, $1,575 and $713 were recorded in income tax expense for the years ended December 31, 2013, 2012 and 2011, respectively.

A current income tax liability of $1,204, and $10,239 existed at December 31, 2013 and 2012, respectively.

The components of income tax expense from operations recorded for the years ended December 31, 2013, 2012 and 2011 are as follows:



	2013		2012			2011
Current:
Federal	$	—	$	10,516		$	1,303
State	753		1,894			975
	753		12,410			2,278
Deferred:
Federal	—		(7,255		)	483
Total income tax expense	$	753	$	5,155		$	2,761

Total income tax expense was allocated to continuing and discontinued operations as follows:

Income tax expense from continuing operations:



	2013		2012		2011
Current:
Federal	$	—	$	1,835	$	1,292
State	753		1,320		958
	753		3,155		2,250
Deferred:
Federal	—		402		622
Total income tax expense from continuing operations	$	753	$	3,557	$	2,872

Income tax expense (benefit) from discontinued operations:



	2013		2012			2011
Current:
Federal	$	—	$	8,681		$	11
State	—		574			17
	—		9,255			28
Deferred:
Federal	—		(7,657		)	(139		)
Total income tax expense (benefit) from discontinued operations	$	—	$	1,598		$	(111	)

Cash paid for income taxes was $9,789, $1,007, and $827 for the years ended December 31, 2013, 2012, and 2011, respectively.