Income Taxes
The Partnership’s earnings are generally not subject to income tax (other than Texas state margin taxes and taxes associated with the Partnership’s corporate subsidiaries, Enable Midstream Services and Enable Muskogee Intrastate Transmission) and are taxable at the individual partner level. The Partnership and its non-corporate subsidiaries are pass-through entities for federal income tax purposes. For these entities, all income, expenses, gains, losses and tax credits generated flow through to their owners and, accordingly, do not result in a provision for income taxes in the consolidated financial statements. Consequently, the Consolidated Statements of Income do not include an income tax provision (other than Texas state margin taxes and taxes associated with the Partnership’s corporate subsidiaries). On December 22, 2017, the act known as the “Tax Cuts and Jobs Act,” was signed into law which lowered the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. As a result of this new law, the Partnership’s corporate subsidiaries re-valued their deferred income tax assets and liabilities as of December 31, 2017, which resulted in recording a Federal deferred income tax benefit of $1 million.
The items comprising income tax expense are as follows:
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | | | |
| (In millions) |
Provision (benefit) for current income taxes | | | | | |
Federal | $ | 1 |
| | $ | (1 | ) | | $ | — |
|
State | 1 |
| | — |
| | 1 |
|
Total provision (benefit) for current income taxes | 2 |
| | (1 | ) | | 1 |
|
Provision (benefit) for deferred income taxes, net | | | | | |
Federal | $ | (2 | ) | | 3 |
| | $ | — |
|
State | (1 | ) | | (1 | ) | | (1 | ) |
Total provision (benefit) for deferred income taxes, net | (3 | ) | | 2 |
| | (1 | ) |
Total income tax expense (benefit) | $ | (1 | ) | | $ | 1 |
| | $ | — |
|
The following schedule reconciles the statutory Federal income tax rate to the effective income tax rate:
|
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | | | |
| (In millions) |
Income (loss) before income taxes | $ | 436 |
| | $ | 314 |
| | $ | (771 | ) |
Federal statutory rate | — | % | | — | % | | — | % |
Expected federal income tax expense | — |
| | — |
| | — |
|
Increase in tax expense (benefit) resulting from: | | | | | |
State income taxes, net of federal income tax | (1 | ) | | 1 |
| | — |
|
Total | (1 | ) | | 1 |
| | — |
|
Total income tax expense (benefit) | $ | (1 | ) | | $ | 1 |
| | $ | — |
|
Effective tax rate | (0.2 | )% | | 0.3 | % | | — | % |
The components of Deferred Income Taxes as of December 31, 2017 and 2016 were as follows:
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
| | | |
| (In millions) |
Deferred tax assets: | | | |
Non-current: | | | |
Accrued bonuses | $ | 17 |
| | $ | — |
|
Total non-current deferred tax assets | 17 |
| | — |
|
Total deferred tax assets | 17 |
| | — |
|
Deferred tax liabilities: | | | |
Non-current: | | | |
Depreciation | 5 |
| | 7 |
|
Intercompany management fee | 18 |
| | 3 |
|
Total non-current deferred tax liabilities | 23 |
| | 10 |
|
Accumulated deferred income taxes, net | $ | 6 |
| | $ | 10 |
|
Uncertain Income Tax Positions
There were no unrecognized tax benefits as of December 31, 2017, 2016 and 2015.
Tax Audits and Settlements
The federal income tax return of the Partnership has been audited through the 2013 tax year.