XML 87 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes  
Income Taxes

Note 7—Income Taxes

 

U.S. Federal and State Taxes

 

As an MLP, we are not subject to U.S. federal income taxes; rather the tax effect of our operations is passed through to our unitholders. Although we are subject to state income taxes in some states, the impact to the years ended December 31, 2011, 2010, and 2009 was immaterial.

 

Canadian Federal and Provincial Taxes

 

In 2010 and prior years, our Canadian operations were operated through a combination of corporate entities subject to Canadian federal and provincial taxes and a limited partnership which was treated as a flow-through entity for tax purposes. Due to changes in Canadian legislation and the Fifth Protocol to the U.S./Canada Tax Treaty, we restructured our Canadian investment on January 1, 2011. As of this date, all of our Canadian operations are conducted within entities that are treated as corporations for Canadian tax purposes (flow through for U.S. tax purposes) and that are subject to Canadian federal and provincial taxes. Additionally, payments of interest and dividends from Canada to other Plains entities are subject to Canadian withholding tax that is treated as income tax expense.

 

Tax Components

 

Components of income tax expense are as follows (in millions):

 

 

 

Year Ended December 31,

 

 

 

2011

 

2010

 

2009

 

Current tax (benefit)/expense:

 

 

 

 

 

 

 

State income tax

 

$

2

 

$

1

 

$

2

 

Canadian federal and provincial income tax

 

36

 

(2

)

13

 

Total current tax (benefit)/ expense

 

$

38

 

$

(1

)

$

15

 

 

 

 

 

 

 

 

 

Deferred tax (benefit)/expense:

 

 

 

 

 

 

 

State income tax

 

$

(2

)

$

1

 

$

—

 

Canadian federal and provincial income tax

 

9

 

(1

)

(9

)

Total deferred tax (benefit)/expense

 

$

7

 

$

—

 

$

(9

)

Total income tax (benefit)/expense

 

$

45

 

$

(1

)

$

6

 

 

The difference between tax expense based on the statutory federal income tax rate and our effective tax expense is summarized as follows (in millions):

 

 

 

Year Ended December 31,

 

 

 

2011

 

2010

 

2009

 

Income before tax

 

$

1,039

 

$

513

 

$

586

 

Partnership earnings not subject to current Canadian tax

 

(909

)

(509

)

(585

)

 

 

$

130

 

$

4

 

$

1

 

Canadian federal and provincial corporate tax rate

 

27

%

28

%

29

%

Income tax at statutory rate

 

$

35

 

$

1

 

$

—

 

 

 

 

 

 

 

 

 

Current tax (benefit)/expense:

 

 

 

 

 

 

 

Canadian withholding tax

 

$

12

 

$

—

 

$

—

 

Canadian period tax as a result of book versus tax differences

 

(9

)

—

 

4

 

Canadian permanent differences between book and tax

 

(2

)

(3

)

9

 

State income tax

 

2

 

1

 

2

 

Current income tax (benefit)/expense

 

$

38

 

$

(1

)

$

15

 

 

 

 

 

 

 

 

 

Deferred tax expense:

 

 

 

 

 

 

 

State deferred income tax

 

$

(2

)

$

1

 

$

—

 

Canadian deferred tax (benefit)/expense as a result of book versus tax differences

 

9

 

(1

)

(9

)

Deferred income tax (benefit)/expense

 

$

7

 

$

—

 

$

(9

)

Total income tax (benefit)/expense

 

$

45

 

$

(1

)

$

6

 

 

Deferred tax assets and liabilities, which are included net within other long-term liabilities and deferred credits in our consolidated balance sheet, result from the following (in millions):

 

 

 

December 31,

 

 

 

2011

 

2010

 

Deferred tax assets:

 

 

 

 

 

Book accruals in excess of current tax deductions

 

$

18

 

$

4

 

Total deferred tax assets

 

18

 

4

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

Property, plant and equipment in excess of tax values

 

(147

)

(128

)

Total deferred tax liabilities

 

(147

)

(128

)

Net deferred tax liabilities

 

$

(129

)

$

(124

)

 

Generally, tax returns for our Canadian entities are open to audit from 2007 through 2011.  Our U.S. and state tax years are generally open to examination from 2008 to 2011.