Income Taxes
We are structured as a master limited partnership with sufficient qualifying income, which is a pass-through entity for federal income tax purposes. We owned a corporation that filed its own federal, foreign and state corporate income tax returns. During the year ended December 31, 2016, we elected to convert the corporation to a limited liability company for federal income tax purposes. The income tax (expense) benefit related to this corporation is included in our income tax (expense) benefit, along with state and local taxes of the limited liability entities.
Income tax (expense) benefit consists of the following:
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (millions) |
Current: | | | | | |
Federal income tax expense | $ | — |
| | $ | (19 | ) | | $ | — |
|
State income tax expense | (1 | ) | | (2 | ) | | — |
|
Deferred: | | | | | |
Federal income tax (expense) benefit | — |
| | (22 | ) | | 97 |
|
State income tax (expense) benefit | (1 | ) | | (3 | ) | | 5 |
|
Total income tax (expense) benefit | $ | (2 | ) | | $ | (46 | ) | | $ | 102 |
|
| | | | | |
As of December 31, 2017 and 2016, we had state deferred tax liabilities of $29 million and $28 million, respectively. The state deferred tax liabilities are primarily associated with Texas franchise taxes. During the year ended December 31, 2016, we recorded a reduction to our net federal deferred tax asset of $58 million resulting from the conversion of our corporation to a limited liability company.
Our effective tax rate differs from statutory rates, primarily due to being structured as a master limited partnership, which is a pass-through entity for federal income tax purposes, while being treated as a taxable entity in certain states, primarily Texas. The State of Texas imposes a margin tax that is assessed at 0.75%, of taxable margin apportioned to Texas for each year ended December 31, 2017, 2016 and 2015.