XML 43 R17.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes Income Taxes (Notes)
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block] INCOME TAXES:
As a partnership, we are not subject to United States federal income tax and most state income taxes. However, the Partnership conducts certain activities through corporate subsidiaries which are subject to federal and state income taxes. The components of the federal and state income tax expense (benefit) of our taxable subsidiaries are summarized as follows:
 Years Ended December 31,
 202320222021
Current expense:
Federal$56 $— $19 
State44 17 24 
Total100 17 43 
Deferred expense (benefit):
Federal227 239 246 
State(24)(58)(106)
Foreign— 6 1 
Total203 187 141 
Total income tax expense$303 $204 $184 
Historically, our effective tax rate has differed from the statutory rate primarily due to partnership earnings that are not subject to United States federal and most state income taxes at the partnership level. A reconciliation of income tax expense at the United States statutory rate to the Partnership’s income tax benefit for the years ended December 31, 2023, 2022 and 2021 is as follows:
Years Ended December 31,
202320222021
Income tax expense at United States statutory rate
$1,175 $1,275 $1,443 
Increase (reduction) in income taxes resulting from:
Partnership earnings not subject to tax(884)(1,086)(1,211)
Noncontrolling interests— 26 — 
State tax, net of federal tax benefit47 19 85 
Statutory rate change(10)(42)(46)
Valuation allowance(3)(4)(63)
Uncertain tax positions(14)(3)(34)
Dividend received deduction(3)(3)(4)
Foreign taxes— 6 1 
Other(5)16 13 
Income tax expense$303 $204 $184 
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The following table summarizes the principal components of the deferred tax assets (liabilities) as follows:
 December 31,
 20232022
Deferred income tax assets:
Net operating losses and other carryforwards$371 $603 
Other46 60 
Total deferred income tax assets417 663 
Valuation allowance— (19)
Net deferred income tax assets417 644 
Deferred income tax liabilities:
Property, plant and equipment(232)(218)
Investments in affiliates(4,003)(4,010)
Trademarks(91)(89)
Other(22)(28)
Total deferred income tax liabilities(4,348)(4,345)
Net deferred income taxes$(3,931)$(3,701)
As of December 31, 2023, ETP Holdco had a federal net operating loss carryforward of $1.4 billion, that can be carried forward indefinitely. A total of $341 million of the federal net operating loss carryforward is limited under IRC §382. Although we expect to fully utilize the IRC §382 limited federal net operating loss, the amount utilized in a particular year may be limited. As of December 31, 2023, Sunoco Retail LLC, a corporate subsidiary of Sunoco LP, had a state net operating loss carryforward of $75 million, which we expect to fully utilize. Sunoco Retail LLC has no federal net operating loss carryforward.
Our corporate subsidiaries have state net operating loss carryforward benefits of $75 million, net of federal tax, some of which expire between 2024 and 2042, while others are carried forward indefinitely. Our corporate subsidiaries have cumulative excess business interest expense of $136 million available for carryforward indefinitely, of which $23 million is limited under IRC §382.
The following table sets forth the changes in unrecognized tax benefits:
 Years Ended December 31,
 202320222021
Balance at beginning of year$52 $56 $90 
Reduction attributable to tax positions taken in prior years(9)(4)(34)
Settlements(3)— — 
Balance at end of year$40 $52 $56 
As of December 31, 2023, we had $40 million ($38 million after federal income tax benefits) related to tax positions which, if recognized, would impact our effective tax rate.
Our policy is to accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense. During 2023, we recognized an interest and penalty benefit of $7 million. At December 31, 2023, we have interest and penalties accrued of $11 million, net of tax.
In November 2015, the Pennsylvania Commonwealth Court determined in Nextel Communications v. Commonwealth (“Nextel”) that the Pennsylvania limitation on NOL carryforward deductions violated the uniformity clause of the Pennsylvania Constitution and struck the NOL limitation in its entirety. In October 2017, the Pennsylvania Supreme Court affirmed the decision with respect to the uniformity clause violation; however, the Court reversed with respect to the remedy and instead severed the flat-dollar limitation, leaving the percentage-based limitation intact. Nextel subsequently filed a petition for writ of certiorari with the United States Supreme Court, and this was denied on June 11, 2018. Certain Pennsylvania taxpayers have subsequently undertaken litigation in Pennsylvania state courts on issues not addressed by the
Pennsylvania Supreme Court in Nextel, specifically, whether the Due Process and Equal Protection Clauses of the United States Constitution and the Remedies Clause of the Pennsylvania Constitution require a court to grant the taxpayer relief. On December 22, 2021, the Pennsylvania Supreme Court found in General Motors Corporation v. Commonwealth (“GM”) that the taxpayer was entitled to meaningful backwards looking relief under the Due Process Clause, meaning the Commonwealth must equalize the taxpayer’s position with taxpayers who were not affected by the NOL cap in place for the year at issue. The Court therefore held the taxpayer was entitled to a refund by calculating its tax for that year with an uncapped NOL deduction. We believe the Pennsylvania Supreme Court’s ruling in GM will more likely than not be upheld if challenged by the Commonwealth. ETC Sunoco previously recognized approximately $67 million ($53 million after federal income tax benefits) in tax benefit based on previously filed tax returns and certain previously filed protective claims as relates to its cases currently held pending the Nextel matter. In addition, based upon the Pennsylvania Supreme Court’s October 2017 decision, and because of uncertainty in the breadth of the application of the decision, ETC Sunoco previously reserved $34 million ($27 million after federal income tax benefits) against the receivable. Subsequent to the Pennsylvania Supreme Court’s decision in GM, the reserve has been reversed and the entire tax benefit of $34 million ($27 million after federal income tax benefit) has been recognized by the Partnership.
The Partnership’s 2020 U.S. Federal income tax return is currently under examination by the Internal Revenue Service. The IRS is auditing Crestwood’s 2020 U.S. Federal income tax return. In general, Energy Transfer and its subsidiaries are no longer subject to examination by the IRS, and most state jurisdictions, for the 2018 and prior tax years.
USAC is currently under examination by the IRS for years 2019 and 2020. Energy Transfer and its other subsidiaries also have various state and local income tax returns in the process of examination or administrative appeal in various jurisdictions. We believe the appropriate accruals or unrecognized tax benefits have been recorded for any potential assessment with respect to these examinations.