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Income Taxes | 3 Months Ended
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Mar. 31, 2020
Income Taxes [Abstract] |
Income Taxes | Note 11. Income Taxes Income taxes are 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 operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We did not rely on any uncertain tax positions in recording our income tax-related amounts during the first quarters of 2020 and 2019. OTA Deferred Tax Liability On March 5, 2020, we settled the Liquidity Option (see Note 8) and assumed OTA’s deferred tax liability, which primarily comprised the outside basis difference of OTA in the 54,807,352 EPD common units it received in October 2014. Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes. At March 5, 2020, the Liquidity Option liability amount was $511.9 million. Since the book value of the Liquidity Option liability exceeded OTA’s estimated deferred tax liability of $439.7 million on that date, we recognized a non-cash benefit in earnings of $72.2 million, which is reflected in the “Benefit from (provision for) income tax” line on our Unaudited Condensed Statement of Consolidated Operations for the three months ended March 31, 2020. At March 31, 2020, OTA’s deferred tax liability decreased to $324.7 million primarily due to a decline in the fair value of OTA’s assets, which resulted in an additional non-cash benefit of $115.0 million in income tax expense for the first quarter of 2020. In total, earnings for the first quarter of 2020 reflect $187.2 million of unrealized income tax benefits related to OTA. The following table presents changes in OTA’s deferred tax liability since the settlement date to March 31, 2020:
Deferred tax liability at March 5, 2020 |  |  |  |  | $ | 439.7 |
Impact of change in fair value of units on deferred tax liability: |  |  |  |  |  |  |
Change in fair value of 54,807,352 EPD common units held by OTA (1) |  | $ | (513.5 | ) |  |  |  |
Multiplied by estimated blended federal and state tax rate |  |  | 22.4 | % |  |  | (114.8 | )
Other, including interim allocations of taxable income |  |  |  |  |  |  | (0.2 | )
Deferred tax liability at March 31, 2020 |  |  |  |  |  | $ | 324.7 |
(1) | The market price of EPD common units declined from $23.67 per unit at March 5, 2020 (settlement date of the Liquidity Option) to $14.30 per unit on March 31, 2020.
The deferred tax liability of OTA will continue to be subject to periodic fluctuations due to changes in the market value of the EPD common units currently held, the resulting changes of which will be recognized through income tax expense (benefit) on our Unaudited Condensed Statements of Consolidated Operations. For example, if the market price of EPD common units increases between reporting dates, we expect to recognize deferred income tax expense in connection with an anticipated increase in OTA’s deferred tax liability. Conversely, if the market price of EPD common units decreases between reporting dates, we expect to recognize a deferred income tax benefit in connection with an anticipated decrease in OTA’s deferred tax liability. Tabular Disclosures Regarding Income Taxes Our federal, state and foreign income tax provision (benefit) is summarized below:
|  | For the Three Months Ended March 31, |
|  | 2020 |  |  | 2019 |
Current portion of income tax provision (benefit): |  |  |  |  |  |
Federal |  | $ | 0.1 |  |  | $ | 0.9 |
State |  |  | 4.6 |  |  |  | 9.0 |
Foreign |  |  | 0.2 |  |  |  | 0.6 |
Total current portion |  |  | 4.9 |  |  |  | 10.5 |
Deferred portion of income tax provision (benefit): |  |  |  |  |  |  |  |
Federal |  |  | (172.8 | ) |  |  | (0.1 | )
State |  |  | (11.3 | ) |  |  | 1.9 |
Total deferred portion |  |  | (184.1 | ) |  |  | 1.8 |
Total provision for (benefit from) income taxes |  | $ | (179.2 | ) |  | $ | 12.3 |
A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:
|  | For the Three Months Ended March 31, |
|  | 2020 |  |  | 2019 |
Pre-Tax Net Book Income (“NBI”) |  | $ | 1,195.8 |  |  | $ | 1,292.7 |
Texas Margin Tax (1) |  |  | 7.7 |  |  |  | 10.9 |
State income taxes (net of federal benefit) (2) |  |  | (11.3 | ) |  |  | 0.2 |
Federal income taxes computed by applying the federal statutory rate to NBI of corporate entities |  |  | (107.8 | ) |  |  | 1.2 |
Federal benefit attributable to settlement of Liquidity Option (2) |  |  | (67.8 | ) |  |  | – |
Provision for (benefit from) income taxes |  | $ | (179.2 | ) |  | $ | 12.3 |
Effective income tax rate |  |  | (15.0 | )% |  |  | 1.0 | %
(1) | Although the Texas Margin Tax is not considered a state income tax, it has the characteristics of an income tax since it is determined by applying a tax rate to a base that considers our Texas-sourced revenues and expenses.
(2) | The total benefit recognized in income tax expense on March 5, 2020 from settlement of the Liquidity Option was $72.2 million, which is comprised of $4.4 million of state income tax benefit and $67.8 million of federal income tax benefit.
Deferred income taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. The following table presents the significant components of deferred tax assets and deferred tax liabilities at the dates indicated:
|  | March 31, |  |  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax liabilities: |  |  |  |  |  |
Attributable to investment in OTA |  | $ | 324.7 |  |  |  |
Attributable to property, plant and equipment |  |  | 103.2 |  |  | $ | 100.2 |
Attributable to investments in other entities |  |  | 3.3 |  |  |  | 3.3 |
Total deferred tax liabilities |  |  | 431.2 |  |  |  | 103.5 |
Less deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryovers (1) |  |  | 0.1 |  |  |  | 0.1 |
Temporary differences related to Texas Margin Tax |  |  | 2.9 |  |  |  | 3.0 |
Total deferred tax assets |  |  | 3.0 |  |  |  | 3.1 |
Total net deferred tax liabilities |  | $ | 428.2 |  |  | $ | 100.4 |
(1) | These losses expire in various years between 2020 and 2037 and are subject to limitations on their utilization.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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