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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes |
Income Taxes | Note 13—Income Taxes Income tax expense is estimated using the tax rate in effect or to be in effect during the relevant periods in the jurisdictions in which we operate. Deferred income tax assets and liabilities are recognized for temporary differences between the basis of assets and liabilities for financial reporting and tax purposes and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. Changes in tax legislation are included in the relevant computations in the period in which such changes are effective. We review contingent tax liabilities for estimated exposures on a more likely than not standard 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, 2014 and 2013, 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, 2014, 2013, and 2012 was immaterial. Canadian Federal and Provincial Taxes 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 our Canadian entities 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, |
|  | 2014 |  | 2013 |  | 2012 |
Current tax expense: |  |  |  |  |  |  |
State income tax |  | $ | 1 |  | $ | 1 |  | $ | 2 |
Canadian federal and provincial income tax |  | 70 |  | 99 |  | 51 |
Total current tax expense |  | $ | 71 |  | $ | 100 |  | $ | 53 |
Deferred tax (benefit)/expense: |  |  |  |  |  |  |
Canadian federal and provincial income tax |  | $ | 100 |  | $ | (1 | ) | $ | 1 |
Total deferred tax (benefit)/expense |  | $ | 100 |  | $ | (1 | ) | $ | 1 |
Total income tax expense |  | $ | 171 |  | $ | 99 |  | $ | 54 |
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, |
|  | 2014 |  | 2013 |  | 2012 |
Income before tax |  | $ | 1,557 |  | $ | 1,490 |  | $ | 1,181 |
Partnership earnings not subject to current Canadian tax |  | (976 | ) | (1,187 | ) | (1,046 | )
|  | $ | 581 |  | $ | 303 |  | $ | 135 |
Canadian federal and provincial corporate tax rate |  | 25 | % | 25 | % | 25 | %
Income tax at statutory rate |  | $ | 145 |  | $ | 76 |  | $ | 34 |
Canadian withholding tax |  | $ | 16 |  | $ | 19 |  | $ | 18 |
Canadian permanent differences and rate changes |  | 9 |  | 3 |  | — |
State income tax |  | 1 |  | 1 |  | 2 |
Total income tax expense |  | $ | 171 |  | $ | 99 |  | $ | 54 |
Deferred tax assets and liabilities are aggregated by the applicable tax paying entity and jurisdiction and result from the following (in millions):
|  | December 31, |
|  | 2014 |  | 2013 |
Deferred tax assets: |  |  |  |  |
Book accruals in excess of current tax deductions |  | $ | 29 |  | $ | 41 |
Net operating losses |  | 2 |  | — |
Derivative instruments |  | — |  | 15 |
Total deferred tax assets |  | 31 |  | 56 |
Deferred tax liabilities: |  |  |  |  |
Derivative instruments |  | (71 | ) | — |
Property and equipment in excess of tax values |  | (322 | ) | (332 | )
Other |  | (49 | ) | (66 | )
Total deferred tax liabilities |  | (442 | ) | (398 | )
Net deferred tax assets / (liabilities) |  | $ | (411 | ) | $ | (342 | )
Balance sheet classification of deferred tax assets / (liabilities): |  |  |  |  |
Other, net |  | $ | 2 |  | $ | — |
Other current liabilities |  | (64 | ) | — |
Other long-term liabilities and deferred credits |  | (349 | ) | (342 | )
|  | $ | (411 | ) | $ | (342 | )
As of December 31, 2014, we had foreign net operating loss carryforwards of $8 million, which will expire in 2034. Generally, tax returns for our Canadian entities are open to audit from 2008 through 2014. Our U.S. and state tax years are generally open to examination from 2011 to 2014.

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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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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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