13.  INCOME TAXES



The partnership is a limited partnership, which is not subject to federal income taxes. The partnership owns a subsidiary, however, that is taxed as a corporation for federal and state income tax purposes. In addition, the partnership is subject to state income taxes in certain states. As a result, the financial statements reflect a provision or benefit for such income taxes. The general partner and the unitholders are responsible for paying federal and state income taxes on their share of the partnership’s taxable income.



The partnership recorded deferred tax assets in the amount of $58 thousand and $78 thousand as of December 31, 2017 and 2016, respectively. The partnership also recorded income taxes payable in the amount of $10 thousand and $45 thousand as of December 31, 2017 and 2016, respectively. The effective tax rate for 2017 and 2016 was immaterial to the financial statements.



The MLP predecessor was a single member limited liability company, treated as a non-taxable disregarded entity in Green Plains’ federal and state income tax returns. For periods prior to the IPO, the consolidated financial statements reflect income taxes as if the MLP predecessor had filed separate federal and state tax returns. Under a tax sharing agreement between the MLP predecessor and Green Plains, the MLP predecessor periodically made payments to Green Plains for its share of Green Plains’ tax liabilities. Differences between amounts due to Green Plains under the agreement and the total income tax expense of the MLP predecessor, which were determined as if the MLP predecessor filed separate tax returns, are reflected as member contributions in partners’ capital. These amounts included contributions of $11 thousand for the year ended December 31, 2015.



Income taxes for the MLP predecessor were accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years those temporary differences were expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

At the closing of the IPO, current and deferred income taxes were settled through equity contributions from Green Plains. At the same time, the MLP predecessor’s participation in the tax sharing agreement was terminated.



Income tax expense (benefit) consists of the following (in thousands):



Differences between income tax expense (benefit) computed at the statutory federal income tax rate on its income subject to tax are presented on the consolidated statements of operations and summarized as follows (in thousands):



The partnership has $58 thousand and $78 thousand of deferred tax assets as of December 31, 2017 and 2016, respectively, related to investments in Birmingham BioEnergy. These deferred tax assets are recognized in the consolidated balance sheets as other assets.



The Tax Cuts and Jobs Act was signed into law on December 22, 2017, effective on January 1, 2018. Among other provisions, the new law reduces the federal statutory corporate income tax rate from 35% to 21%. The partnership revalued its deferred tax assets at the new rate and tax expense of $19 thousand was recorded in the current year as a result of the revaluation. 



The partnership conducts business and its parent files tax returns in several states within the United States. The partnership’s federal and state returns filed by its parent for the tax years ended December 31, 2014, and later are still subject to audit.