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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes |
Income Taxes | Note 12—Income Taxes We estimate (i) income taxes in the jurisdictions in which we operate, (ii) net deferred tax assets and liabilities based on temporary differences that are expected to be recovered or settled at the enacted tax rates expected in future periods, (iii) valuation allowances for deferred tax assets and (iv) contingent tax liabilities for estimated exposures related to our current tax positions. Pursuant to FASB guidance related to accounting for uncertainty in income taxes, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position and also the past administrative practices and precedents of the taxing authority. As of December 31, 2012 and 2011, we had not recognized any material amounts in connection with uncertainty in 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, 2012, 2011, and 2010 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, |
|  | 2012 |  | 2011 |  | 2010 |
Current tax (benefit)/expense: |  |  |  |  |  |  |
State income tax |  | $ | 2 |  | $ | 2 |  | $ | 1 |
Canadian federal and provincial income tax |  | 51 |  | 36 |  | (2 | )
Total current tax (benefit)/ expense |  | $ | 53 |  | $ | 38 |  | $ | (1 | )
Deferred tax (benefit)/expense: |  |  |  |  |  |  |
State income tax |  | $ | — |  | $ | (2 | ) | $ | 1 |
Canadian federal and provincial income tax |  | 1 |  | 9 |  | (1 | )
Total deferred tax expense |  | $ | 1 |  | $ | 7 |  | $ | — |
Total income tax (benefit)/expense |  | $ | 54 |  | $ | 45 |  | $ | (1 | )
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, |
|  | 2012 |  | 2011 |  | 2010 |
Income before tax |  | $ | 1,181 |  | $ | 1,039 |  | $ | 513 |
Partnership earnings not subject to current Canadian tax |  | (1,046 | ) | (909 | ) | (509 | )
|  | $ | 135 |  | $ | 130 |  | $ | 4 |
Canadian federal and provincial corporate tax rate |  | 25 | % | 27 | % | 28 | %
Income tax at statutory rate |  | $ | 34 |  | $ | 35 |  | $ | 1 |
Current tax (benefit)/expense: |  |  |  |  |  |  |
Canadian withholding tax |  | $ | 18 |  | $ | 12 |  | $ | — |
Canadian period tax adjustments resulting from tax rate changes and tax return filings |  | (3 | ) | (9 | ) | — |
Canadian permanent differences between book and tax |  | 2 |  | (2 | ) | (3 | )
State income tax |  | 2 |  | 2 |  | 1 |
Current income tax (benefit)/expense |  | $ | 53 |  | $ | 38 |  | $ | (1 | )
Deferred tax expense: |  |  |  |  |  |  |
State deferred income tax (benefit)/expense |  | $ | — |  | $ | (2 | ) | $ | 1 |
Canadian deferred tax (benefit)/expense as a result of book versus tax differences |  | 1 |  | 9 |  | (1 | )
Deferred income tax expense |  | $ | 1 |  | $ | 7 |  | $ | — |
Total income tax (benefit)/expense |  | $ | 54 |  | $ | 45 |  | $ | (1 | )
Deferred tax assets and liabilities, which are included net in “Other long-term liabilities and deferred credits” on our Consolidated Balance Sheet, result from the following (in millions):
|  | December 31, |
|  | 2012 |  | 2011 |
Deferred tax assets: |  |  |  |  |
Book accruals in excess of current tax deductions |  | $ | 28 |  | $ | 18 |
Total deferred tax assets |  | 28 |  | 18 |
Deferred tax liabilities: |  |  |  |  |
Property and equipment in excess of tax values |  | (397 | ) | (147 | )
Total deferred tax liabilities |  | (397 | ) | (147 | )
Net deferred tax liabilities |  | $ | (369 | ) | $ | (129 | )
The BP NGL Acquisition in 2012 increased net deferred tax liabilities by approximately $236 million. See Note 3 for additional discussion of this acquisition. Generally, tax returns for our Canadian entities are open to audit from 2008 through 2012. Our U.S. and state tax years are generally open to examination from 2009 to 2012.

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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/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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