Entity information:
7. Income Taxes
The Partnership is a limited partnership and generally is not subject to federal or state income taxes. In January 2017, the IRS announced its decision to exclude cokemaking as a qualifying income generating activity in its final regulations (the "Final Regulations") issued under section 7704(d)(1)(E) of the Internal Revenue Code relating to the qualifying income exception for publicly traded partnerships. Subsequent to the 10-year transition period, certain cokemaking entities in the Partnership will become taxable as corporations.
As part of the Granite City Dropdown in the first quarter of 2015, the Partnership acquired an interest in Gateway Cogeneration Company, LLC, which is subject to income taxes for federal and state purposes. In addition, the Granite City and Middletown operations in the Partnership are subject to state and local income taxes.
The components of income tax expense (benefit) are as follows:
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(Dollars in millions)
Income taxes currently payable:
 
 
 
 
 
 
U.S. federal
 
$
1.7

 
$
2.1

 
$
—

U.S. state and local
 
0.9

 
—

 
—

Total taxes currently payable
 
2.6

 
2.1

 
—

 
 
 
 
 
 
 
Deferred tax expense (benefit):
 
 
 
 
 
 
U.S. federal
 
72.5

 
(1.1
)
 
1.7

U.S. state and local
 
8.8

 
1.0

 
(4.2
)
Total deferred tax expense (benefit)
 
81.3

 
(0.1
)
 
(2.5
)
Total
 
$
83.9

 
$
2.0

 
$
(2.5
)

The reconciliation of Partnership income tax expense (benefit) at the U.S. statutory rate is as follows:
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(Dollars in millions)
Income tax expense at U.S. statutory rate of 35 percent
 
$
23.3

 
35.0
 %
 
$
43.2

 
35.0
 %
 
$
31.0

 
35.0
 %
(Reduction) increase in income taxes resulting from:
 
 
 
 
 
 
 
 
 
 
 
 
Impact of Final Regulations(1)
 
148.6

 
223.5
 %
 
—

 
—
 %
 
—

 
—
 %
Impact of Tax Legislation(2)
 
(68.8
)
 
(103.1
)%
 
—

 
—
 %
 
—

 
—
 %
Partnership income not subject to tax
 
(21.8
)
 
(32.8
)%
 
(42.2
)
 
(34.1
)%
 
(30.2
)
 
(34.0
)%
State and local tax for Middletown and Granite City operations
 
2.6

 
3.7
 %
 
1.2

 
0.9
 %
 
(2.3
)
 
(2.6
)%
Other
 
—

 
—
 %
 
(0.2
)
 
(0.2
)%
 
(1.0
)
 
(1.0
)%
Total tax provision
 
$
83.9

 
126.3
 %
 
$
2.0

 
1.6
 %
 
$
(2.5
)
 
(2.6
)%

(1)
As a result of the Final Regulation discussed above, the Partnership recorded deferred income tax expense of $148.6 million related to the future tax obligation expected to be owed for the projected book to tax differences at the end of the 10-year transition period.
(2)
On December 22, 2017, the Tax Legislation was enacted. The Tax Legislation significantly revises the U.S. corporate income tax structure, including lowering corporate income tax rates. As a result, the Partnership recorded an income tax benefit of $68.8 million for the remeasurement of its U.S. deferred income tax liabilities, reversing a portion of the deferred income tax expense recorded from the Final Regulations in the first quarter of 2017.
The tax effects of temporary differences that comprise the net deferred income tax (liability) asset are as follows:
 
 
December 31,
 
 
2017
 
2016
 
 
(Dollars in millions)
Deferred tax assets:
 
 
 
 
State and local net operating loss
 
$
—

 
$
0.5

Other liabilities not yet deductible
 
—

 
0.1

Total deferred tax assets
 
—

 
0.6

Less valuation allowance
 
—

 
(0.2
)
Deferred tax asset, net
 
—

 
0.4

Deferred tax liabilities:
 
 
 
 
Properties, plants and equipment(1)
 
(118.4
)
 
(37.5
)
Other liabilities
 
(0.8
)
 
(0.8
)
Total deferred tax liabilities
 
(119.2
)
 
(38.3
)
Net deferred tax liability
 
$
(119.2
)
 
$
(37.9
)
(1)
The increase in the deferred tax liabilities associated with properties, plants and equipment is a result of the Final Regulations discussed above.
The Partnership is currently open to examination by the IRS for the tax years ended December 31, 2014 and forward. State and local income tax returns are generally subject to examination for a period of three years after filing of the respective returns. Pursuant to the omnibus agreement, SunCoke will fully indemnify us with respect to any tax liability arising prior to or in connection with the closing of our IPO. There are no uncertain tax positions recorded at December 31, 2017 or 2016 and there were no interest or penalties recognized related to uncertain tax positions for the years ended December 31, 2017, 2016 or 2015.