Income Taxes
The operations of a partnership are generally not subject to income taxes because its income is taxed directly to its partners.
The Partnership is 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. 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 $352, $726 and $1,048 were recorded in income tax expense for the years ended December 31, 2017, 2016 and 2015, respectively.
A current income tax liability of $510, and $870 existed at December 31, 2017 and 2016, respectively.
Cash paid for income taxes was $712, $841, and $1,237 for the years ended December 31, 2017, 2016 and 2015, respectively.
The Bipartisan Budget Act of 2015 provides that any tax adjustments resulting from partnership audits will generally be determined, and any resulting tax, interest and penalties collected, at the partnership level for tax years beginning after December 31, 2017. The Bipartisan Budget Act of 2015 allows a partnership to elect to apply these provisions to any return of the partnership filed for partnership taxable years beginning after the date of the enactment, November 2, 2015. The Partnership does not intend to elect to apply these provisions for any tax return filed for partnership taxable years beginning before January 1, 2018.
On December 22, 2017, the President signed into law Public Law No. 115-97, a comprehensive tax reform bill commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that makes significant changes to the U.S. Internal Revenue Code. Among other changes, the Tax Act includes a new deduction on certain pass-through income, a repeal of the partnership technical termination rule, and new limitations on certain deductions and credits, including interest expense deductions. Since the operations of a partnership are not subject to federal income tax, and most provisions of the Tax Act are effective for tax years beginning after December 31, 2017, the legislation has no material impact to the Partnership for 2017. We are in the process of analyzing the Tax Act and its possible effect going forward, as it will impact allocations to unitholders.
As of December 31, 2017, the tax years that remain open to assessment by federal and state jurisdictions are 2014-2016.