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Income Taxes | 9 Months Ended
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Sep. 30, 2020
Income Taxes [Abstract] |
Income Taxes | Note 11. Income Taxes The following table presents the components of our consolidated benefit from (provision for) income taxes for the periods indicated (dollars in millions):
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Deferred tax benefit (expense) attributable to OTA |  | $ | 21.3 |  |  |  |  |  | $ | 158.0 |  |  |  |
Texas Margin Tax |  |  | (7.2 | ) |  | $ | (15.5 | ) |  |  | (21.9 | ) |  | $ | (36.5 | )
Other |  |  | 5.0 |  |  |  | 0.1 |  |  |  | 2.5 |  |  |  | (0.9 | )
Benefit from (provision for) income taxes |  | $ | 19.1 |  |  | $ | (15.4 | ) |  | $ | 138.6 |  |  | $ | (37.4 | )
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 nine months ended September 30, 2020 and 2019. OTA Deferred Tax Liability On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement (see Note 8) and indirectly assumed OTA’s deferred tax liability, which reflects OTA’s outside basis difference in the limited partner interests it received from the Partnership in October 2014. Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA 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 nine months ended September 30, 2020. Subsequent to March 5, 2020 and through September 30, 2020, OTA recognized an additional net, non-cash deferred income tax benefit of $85.8 million due to a decrease in the outside basis difference of its investment in the Partnership, which in turn was driven by a decline in the market price of Partnership common units since March 5, 2020. In total, earnings for the three and nine months ended September 30, 2020 reflect $21.3 million and $158.0 million, respectively, of net deferred income tax benefit attributable to OTA. On September 30, 2020, OTA exchanged the Partnership common units it owned for non-publicly traded preferred units having a stated value of $1,000 per unit (see Note 8). As a result and beginning September 30, 2020, OTA’s deferred tax liability no longer fluctuates due to market price changes in the Partnership’s common units. Our subsidiary OTA is a corporation for U.S. federal income tax purposes, and the exchange of common units for preferred units did not constitute a taxable transaction for OTA. Tabular Disclosures Regarding Income Taxes Our federal, state and foreign income tax benefit (provision) is summarized below:
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Current portion of income tax benefit (provision): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 5.3 |  |  | $ | 0.4 |  |  | $ | 3.0 |  |  | $ | (0.1 | )
State |  |  | (4.7 | ) |  |  | (9.1 | ) |  |  | (13.4 | ) |  |  | (25.6 | )
Foreign |  |  | 0.2 |  |  |  | – |  |  |  | – |  |  |  | (0.8 | )
Total current portion |  |  | 0.8 |  |  |  | (8.7 | ) |  |  | (10.4 | ) |  |  | (26.5 | )
Deferred portion of income tax benefit (provision): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 18.7 |  |  |  | (0.3 | ) |  |  | 145.1 |  |  |  | (0.2 | )
State |  |  | (0.4 | ) |  |  | (6.4 | ) |  |  | 3.9 |  |  |  | (10.9 | )
Foreign |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 0.2 |
Total deferred portion |  |  | 18.3 |  |  |  | (6.7 | ) |  |  | 149.0 |  |  |  | (10.9 | )
Total benefit from (provision for) income taxes |  | $ | 19.1 |  |  | $ | (15.4 | ) |  | $ | 138.6 |  |  | $ | (37.4 | )
A reconciliation of the benefit from (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 September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Pre-Tax Net Book Income (“NBI”) |  | $ | 1,064.9 |  |  | $ | 1,060.2 |  |  | $ | 3,381.2 |  |  | $ | 3,599.1 |
Texas Margin Tax (1) |  |  | (7.2 | ) |  |  | (15.5 | ) |  |  | (21.9 | ) |  |  | (36.5 | )
State income tax benefit (provision), net of federal benefit (2) |  |  | 1.6 |  |  |  | – |  |  |  | 9.7 |  |  |  | (0.3 | )
Federal income tax benefit (provision) computed by applying the federal statutory rate to NBI of corporate entities |  |  | 25.1 |  |  |  | 0.1 |  |  |  | 83.4 |  |  |  | (0.6 | )
Federal benefit attributable to settlement of Liquidity Option (2) |  |  | – |  |  |  | – |  |  |  | 67.8 |  |  |  | – |
Other differences |  |  | (0.4 | ) |  |  | – |  |  |  | (0.4 | ) |  |  | – |
Benefit from (provision for) income taxes |  | $ | 19.1 |  |  | $ | (15.4 | ) |  | $ | 138.6 |  |  | $ | (37.4 | )
Effective income tax rate |  |  | 1.8 | % |  |  | (1.5 | )% |  |  | 4.1 | % |  |  | (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:
|  | September 30, |  |  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax liabilities: |  |  |  |  |  |
Attributable to investment in OTA |  | $ | 353.9 |  |  |  |
Attributable to property, plant and equipment |  |  | 107.9 |  |  | $ | 100.2 |
Attributable to investments in other entities |  |  | 4.2 |  |  |  | 3.3 |
Total deferred tax liabilities |  |  | 466.0 |  |  |  | 103.5 |
Less deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryovers (1) |  |  | 0.1 |  |  |  | 0.1 |
Temporary differences related to Texas Margin Tax |  |  | 2.6 |  |  |  | 3.0 |
Total deferred tax assets |  |  | 2.7 |  |  |  | 3.1 |
Total net deferred tax liabilities |  | $ | 463.3 |  |  | $ | 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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