INCOME TAXES:

The following table provides a summary of the current and deferred components of income tax expense (benefit) from continuing operations:



	Successor									Predecessor
	Year Ended December 31, 2014			Year Ended December 31, 2013			Period from Acquisition (March 26, 2012) to December 31, 2012			Period from January 1, 2012 to March 25, 2012
Current expense (benefit):
Federal	$	261		$	(52	)	$	(43	)	$	—
State	24			(7		)	3			(1		)
Total	285			(59		)	(40		)	(1		)
Deferred expense (benefit):
Federal	$	(114	)	$	119		$	81		$	10
State	(25		)	38			(2		)	3
Total	(139		)	157			79			13
Total income tax expense	$	146		$	98		$	39		$	12

The differences between the Company’s effective income tax rate and the U.S. federal income tax statutory rate were as follows:



	Successor									Predecessor
	Year Ended December 31, 2014			Year Ended December 31, 2013			Period from Acquisition (March 26, 2012) to December 31, 2012			Period from January 1, 2012 to March 25, 2012
Computed statutory income tax expense (benefit) at 35%	$	50		$	(165	)	$	17		$	16
Changes in income taxes resulting from:
Earnings from unconsolidated investments related to anticipated receipt of dividends	—			—			5			(5		)
Non-deductible executive compensation	—			—			18			—
Premium on debt retirement	(10		)	—			—			—
State income taxes, net of federal income tax benefit	4			21			1			1
Non-deductible goodwill impairment	—			241			—			—
Non-deductible goodwill included in the Lake Charles LNG Transaction	105			—			—			—
Other	(3		)	1			(2		)	—
Income tax expense	$	146		$	98		$	39		$	12

Deferred income taxes result from temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The table below summarizes the principal components of the Company’s deferred tax assets (liabilities) as follows:



	December 31,
	2014			2013
Deferred income tax assets:
Other postretirement benefits	$	5		$	5
Debt amortization	40			67
Other	26			40
Total deferred income tax assets	71			112
Valuation allowance	(2		)	—
Net deferred income tax assets	$	69		$	112

Deferred income tax liabilities:
Property, plant and equipment	$	(776	)	$	(956	)
Investment in unconsolidated affiliates	(795		)	(793		)
Other	(6		)	(16		)
Total deferred income tax liabilities	(1,577		)	(1,765		)
Net deferred income tax liability	(1,508		)	(1,653		)
Less current income tax assets	3			6
Accumulated deferred income taxes	$	(1,511	)	$	(1,659	)

As of December 31, 2014, the Company has $18 million ($12 million, net of federal tax) of unrecognized tax benefits, $11 million of which would impact the Company’s effective income tax rate if recognized. The Company expects that its unrecognized tax benefits will be reduced by $2 million within the next 12 months.

The Company’s policy is to classify and accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense in its consolidated statement of operations, which is consistent with the recognition of these items in prior reporting periods.

The Company and Southern Union are no longer subject to U.S. federal, state or local examinations for the tax periods prior to 2005. The Company and Southern Union are under examination by the Internal Revenue Service (IRS) for the tax years 2004 through 2009. For the 2006 tax year, the IRS has challenged $545 million of the $690 million deferred gain associated with the like kind exchange involving certain assets of Southern Union’s distribution operations and gathering and processing operations. The Company and Southern Union have been vigorously defending this tax position and believe it has reached a tentative settlement with the IRS which will not have a material impact on these financial statements.