We and our subsidiaries, CenStar and Verde Energy USA, Inc. ("Verde Corp") are each subject to U.S. federal income tax as corporations. CenStar and Verde Corp file consolidated tax returns in jurisdictions that allow combined reporting. Spark HoldCo and its subsidiaries, with the exception of CenStar and Verde Corp, are treated as flow-through entities for U.S. federal income tax purposes, and, as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Accordingly, we are subject to U.S. federal income taxation on our allocable share of Spark HoldCo's net U.S. taxable income.

In our financial statements, we report federal and state income taxes for our share of the partnership income attributable to our ownership in Spark HoldCo and for the income taxes attributable to CenStar and Verde Corp. Net income attributable to non-controlling interest includes the provision for income taxes related to CenStar and Verde Corp.

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the tax bases of the assets and liabilities. We apply existing tax law and the tax rate that we expect to apply to taxable income in the years in which those differences are expected to be recovered or settled in calculating the deferred tax assets and liabilities. Effects of changes in tax rates on deferred tax assets and liabilities are recognized in income in the period of the tax rate enactment. A valuation allowance is recorded when it is not more likely than not that some or all of the benefit from the deferred tax asset will be realized.


(in thousands)	2020		2019		2018
Current:
Federal	$	10,722	$	10,511	$	3,862
State	3,109		3,675		1,099
Total Current	13,831		14,186		4,961

Deferred:
Federal	1,778		(4,668)		(2,792)
State	127		(2,261)		(92)
Total Deferred	1,905		(6,929)		(2,884)
Provision for income taxes	$	15,736	$	7,257	$	2,077

The effective income tax rate was 19%, 34%, and (17)% for the years ended December 31, 2020, 2019, and 2018, respectively. The following table reconciles the income tax benefit that would result from application of the statutory federal tax rate, 21%, 21%, and 21% for the years ended December 31, 2020, 2019, and 2018 respectively, to the amount included in the consolidated statement of operations:


(in thousands)	2020		2019		2018
Expected provision at federal statutory rate	$	17,630	$	4,509	$	(2,586)
(Decrease) increase resulting from:
Non-controlling interest	(6,464)		(1,329)		1,738
Class A Preferred Stock dividends	1,304		1,341		1,579



Intra-entity transfer of customer contracts	—		—		473
State income taxes, net of federal income tax effect	4,145		1,382		428
Prior year tax adjustments	(993)		1,060		(31)
Non-deductible expenses	195		256		256
Other	(81)		38		220
Provision for income taxes	$	15,736	$	7,257	$	2,077

Total income tax expense for the years ended December 31, 2020, 2019 and 2018 differed from amounts computed by applying the U.S. federal statutory tax rates to pre-tax income primarily due to state income taxes and the impact of permanent differences between book and taxable income, most notably the income attributable to non-controlling interest, which gets taxed at the non-controlling interest partner level.


(in thousands)	2020		2019
Deferred Tax Assets:
Investment in Spark HoldCo	$	25,751	$	28,671


State net operating loss carryforward	—		140
Derivative Liabilities	416		1,669
Intangibles	1,393		—
Other	531		220
Total deferred tax assets	28,091		30,700

Deferred Tax Liabilities:

Intangibles	—		(808)
Property and equipment	—		(27)


Other	(131)		—
Total deferred tax liabilities	(131)		(835)

Total deferred tax assets/liabilities	$	27,960	$	29,865

We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets. In making this determination, we consider all available positive and negative evidence and makes certain assumptions. We consider, among other things, our deferred tax liabilities, the overall business environment, our historical earnings and losses, current industry trends, and our outlook for future years. We believe it is more likely than not that our deferred tax assets will be utilized, and accordingly have not recorded a valuation allowance on these assets.

The tax years 2013 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject to income tax. An affiliate owned by our Founder would be responsible for any audit adjustments incurred in connection with transactions occurring prior to July 2014 for Spark Energy, Inc. and Spark HoldCo.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2020 and 2019 there was no liability, and for the years ended December 31, 2020, 2019 and 2018, there was no expense recorded for interest and penalties associated with uncertain tax positions or unrecognized tax positions. Additionally, the Company does not have unrecognized tax benefits as of December 31, 2020 and 2019.