INCOME TAXES
Continuing operations
Our provision for income taxes for continuing operations relates to: (i) Texas margin taxes for the Partnership, and (ii) an insignificant amount of Canadian income taxes on SSS earnings in Canada (most of our earnings are exempted under a U.S/Canada tax treaty). For federal income tax purposes, we report our income, expenses, gains, and losses as a partnership not subject to income taxes. As such, each partner is responsible for his or her share of federal and state income tax. Net earnings for financial statement purposes may differ significantly from taxable income reportable to each partner because of differences between the tax basis and financial reporting basis of assets and liabilities.
The composition of our provision for income taxes for continuing operations is as follows:
|
| | | | | | | | | | | | |
| Year Ended December 31, | |
| 2017 | | 2016 | | 2015 | |
| | | | | | |
| ($ in thousands) | |
Texas margin tax | $ | 85 |
| | $ | (192 | ) | | $ | 273 |
| |
Canadian income tax | (14 | ) | | 1 |
| | (15 | ) | |
Total provision for income taxes | $ | 71 |
| | $ | (191 | ) | | $ | 258 |
| |
We are responsible for our portion of the Texas margin tax that is included in our subsidiaries’ consolidated Texas franchise tax returns. For our operations in Texas, the margin tax rate is 0.38% as defined by applicable state law. The margin tax qualifies as an income tax under GAAP, which requires us to recognize the impact of this tax on the temporary differences between the financial statement assets and liabilities and their tax basis attributable to such tax.
Discontinued operations
Our provision for income taxes for discontinued operations relates to (i) Texas margin taxes for Direct Fuels, and (ii) federal and state income taxes for Emerge Energy Distributors Inc. (“Distributor”). Distributor reports its income, expenses, gains, and losses as a corporation and is subject to both federal and state income taxes. Federal and state income tax expense and Texas margin tax expense for discontinued operations for the years ended December 31, 2016 and 2015 was $19 thousand and $231 thousand.