Income Taxes
The Company conducts certain activities through wholly-owned subsidiaries that are corporations which in certain circumstances are subject to federal, state and local income taxes. As of December 31, 2016, 2015 and 2014, the components of federal and state income tax expense are summarized as follows (in millions):
|
| | | | | | | | | | | |
| December 31, |
| 2016 |
| 2015 | | 2014 |
Current expense (benefit): |
|
|
| | |
Federal | $ | (7.4 | ) |
| $ | 0.1 |
| | $ | 0.2 |
|
State | 0.4 |
|
| — |
| | 0.2 |
|
Total | $ | (7.0 | ) |
| $ | 0.1 |
| | $ | 0.4 |
|
|
|
|
| | |
Deferred expense (benefit): |
|
|
| | |
Federal | $ | (0.6 | ) |
| $ | (26.5 | ) | | $ | (1.5 | ) |
State | (0.1 | ) |
| (2.0 | ) | | 0.3 |
|
Total | $ | (0.7 | ) |
| $ | (28.5 | ) | | $ | (1.2 | ) |
Total income tax benefit | $ | (7.7 | ) |
| $ | (28.4 | ) | | $ | (0.8 | ) |
A reconciliation of effective tax rate to the U.S. statutory rate attributable to operations for December 31, 2016, 2015 and 2014 is as follows:
|
| | | | | | | | |
| December 31, |
| 2016 | | 2015 | | 2014 |
Federal income tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % |
Partnership earnings not subject to tax | (34.9 | )% | | (13.8 | )% | | (22.4 | )% |
State income taxes, net of federal income tax effect | (0.1 | )% | | 0.6 | % | | (0.4 | )% |
State tax rate change | — | % | | 0.2 | % | | — | % |
Impact of non-deductible goodwill | — | % | | (5.0 | )% | | (11.5 | )% |
Anchor LLC conversions | — | % | | 0.3 | % | | — | % |
Other items, net (1) | 2.3 | % | | (0.4 | )% | | — | % |
Effective tax rate | 2.3 | % | | 16.9 | % | | 0.7 | % |
(1) 2016 includes an adjustment for a tax benefit associated with the decision to liquidate a wholly-owned C corporation as of December 31, 2015, and convert it to an entity which will not be subject to tax. See Note 2 for further information on this adjustment.
Deferred Taxes
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The table below summarizes the principal components of the deferred tax assets (liabilities) as follows as of December 31, 2016 and 2015 (in millions):
|
| | | | | | | |
| December 31, |
| 2016 | | 2015 |
Deferred income tax assets: |
|
|
|
Net operating loss carryforwards | $ | 1.3 |
|
| $ | 0.8 |
|
Total deferred income tax assets | $ | 1.3 |
|
| $ | 0.8 |
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
Intangible assets | $ | — |
|
| $ | (0.1 | ) |
Unrealized gains | (0.5 | ) | | (0.5 | ) |
Property, plant and equipment | (1.8 | ) |
| (1.9 | ) |
Total deferred income tax liabilities | $ | (2.3 | ) |
| $ | (2.5 | ) |
|
|
|
|
|
Net deferred income tax liability | $ | (1.0 | ) |
| $ | (1.7 | ) |
As a result of the Company’s analysis, management has determined that the Company does not have any uncertain tax positions. As of December 31, 2016, the Company had tax loss carryforwards of approximately $3.6 million, which are expected to be utilized prior to expiration in 2036. As of December 31, 2016, the Company had $1.3 million deferred tax assets arising from net operating loss carryforwards. The Company’s federal and state tax returns remain subject to examination by taxing authorities for three years.