Income Tax

As a limited partnership, we are generally not subject to state and federal income tax, with the exception of the state of Texas. Included in our provision for income tax is a tax imposed by the state of Texas of 0.5% of gross margin in Texas (“franchise tax”). Our taxable income or loss, which may vary substantially from the net income or net loss reported in the Consolidated Statements of Operations, is includable in the federal and state income tax returns of each unitholder. We are, however, subject to a statutory requirement that our non-qualifying income cannot exceed 10% of our total gross income, determined on a calendar year basis under the applicable income tax provisions. If the amount of our non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. Accordingly, certain activities that generate non-qualifying income are conducted through a taxable corporate subsidiary, PropCo. PropCo is subject to federal and state income tax and pays any income taxes related to the results of its operations. For the year ended December 31, 2012 and the nine months ended September 30, 2013, our non-qualifying income did not exceed the statutory limit.

Our Predecessor was subject to income tax and was included in the consolidated income tax returns of SUSS. Income taxes were allocated to our Predecessor based on separate-company computations of income or loss. The income tax expense for the three and nine months ended September 30, 2012 primarily are those of our Predecessor.



	Three Months Ended										Nine Months Ended
	September 30, 2012					September 30, 2013					September 30, 2012					September 30, 2013
	Predecessor										Predecessor
	(in thousands)			Tax rate %		(in thousands)			Tax rate %		(in thousands)			Tax rate %		(in thousands)			Tax rate %
Tax at statutory federal rate	$	1,875		35.0	%	$	3,410		35.0	%	$	4,832		35.0	%	$	9,731		35.0	%
Partnership earnings not subject to tax	(202		)	(3.8	)%	(3,410		)	(35.0	)%	(202		)	(1.5	)%	(9,731		)	(35.0	)%
Corporate subsidiary earnings subject to tax	—			—	%	68			0.7	%	—			—	%	80			0.3	%
State and local tax, net of federal benefit	53			1.0	%	77			0.8	%	150			1.1	%	218			0.8	%
Other	13			0.3	%	—			—	%	33			0.3	%	—			—	%
Tax expense per financial statement	$	1,739		32.5	%	$	145		1.5	%	$	4,813		34.9	%	$	298		1.1	%