Income Taxes
The Partnership is not a taxable entity for U.S. federal income tax purposes, and taxes are generally borne by unitholders through the allocation of taxable income. In connection with the Offering, Predecessor current and deferred tax liabilities of $104.0 million were eliminated upon consummation of the Partnership. At December 31, 2017, the net difference between the tax bases and reported amounts of the Partnership’s assets and liabilities is $31.7 million.
The provision for income taxes included in the Consolidated Statements of Operations for the periods presented relates to the Predecessor. The Predecessor is not a separate taxable entity for U.S. federal and certain states purposes, and its results are included in the consolidated income tax returns of Oasis Petroleum. The provision for income taxes recorded by the Predecessor was determined as if the Predecessor was a stand-alone taxpayer for the period prior to the Offering on September 25, 2017.
The Predecessor’s income tax expense consists of the following:
|
| | | | | | | | | | | | |
| | December 31, |
| | 2017 | | 2016 | | 2015 |
Current: | | | | | | |
Federal | | $ | 15,571 |
| | $ | 21,272 |
| | $ | 14,811 |
|
State | | 2,047 |
| | 2,797 |
| | 1,985 |
|
| | 17,618 |
| | 24,069 |
| | 16,796 |
|
Deferred: | | | | | | |
Federal | | 4,631 |
| | 772 |
| | 3,191 |
|
State | | 609 |
| | 16 |
| | 352 |
|
| | 5,240 |
| | 788 |
| | 3,543 |
|
Total income tax expense | | $ | 22,858 |
| | $ | 24,857 |
| | $ | 20,339 |
|
The reconciliation of income taxes calculated at the U.S. federal statutory rate to the Predecessor’s effective tax rate for the years presented is as follows:
|
| | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2017 | | 2016 | | 2015 |
| | (%) | | (In thousands) | | (%) | | (In thousands) | | (%) | | (In thousands) |
U.S. federal statutory rate | | 35.00 | % | | 33,392 |
| | 35.00 | % | | 22,745 |
| | 35.00 | % | | 18,648 |
|
Earnings not subject to tax subsequent to the Offering | | (12.83 | )% | | (12,239 | ) | | — | % | | — |
| | — | % | | — |
|
State income taxes, net of federal income tax benefit | | 1.81 | % | | 1,727 |
| | 2.90 | % | | 1,882 |
| | 2.94 | % | | 1,565 |
|
Other | | (0.02 | )% | | (22 | ) | | 0.35 | % | | 230 |
| | 0.23 | % | | 126 |
|
Annual effective tax rate | | 23.96 | % | | 22,858 |
| | 38.25 | % | | 24,857 |
| | 38.17 | % | | 20,339 |
|