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Income Tax Expense | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income Tax Expense | Income Tax Expense As a partnership, we are generally not subject to 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 Partnership’s income before income tax expense by geographic area were as follows:
|  | Year Ended December 31,
|  | 2025 |  | 2024 |  | 2023
United States |  | $ | 397 |  |  | $ | 1,040 |  |  | $ | 430 |
Foreign |  | 192 |  |  | 9 |  |  | — |
Total |  | $ | 589 |  |  | $ | 1,049 |  |  | $ | 430 |
The components of the federal and state income tax expense (benefit) of our taxable subsidiaries were summarized as follows:
| Year Ended December 31,
| 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |
Federal | $ | 18 |  |  | $ | 152 |  |  | $ | 16 |
State | (1) |  |  | 37 |  |  | 7 |
Foreign | 7 |  |  | — |  |  | — |
Total current income tax expense | 24 |  |  | 189 |  |  | 23 |
Deferred: |  |  |  |  |
Federal | 22 |  |  | (19) |  |  | 9 |
State | (8) |  |  | 5 |  |  | 4 |
Foreign | 24 |  |  | — |  |  | — |
Total deferred tax expense (benefit) | 38 |  |  | (14) |  |  | 13 |
Income tax expense | $ | 62 |  |  | $ | 175 |  |  | $ | 36 |
Our effective tax rate differs from the statutory rate primarily due to Partnership earnings that are not subject to U.S. federal and most state income taxes at the Partnership level. A reconciliation of income tax expense at the U.S. federal statutory rate to net income tax expense is as follows:
| Year Ended December 31,
| 2025 |  | 2024 |  | 2023
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Income tax expense at United States statutory rate | $ | 124 |  |  | 21.00 | % |  | $ | 220 |  |  | 21.00 | % |  | $ | 90 |  |  | 21.00 | %
Increase (reduction) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
Non-taxable Partnership earnings | (67) |  |  | (11.40) |  |  | (84) |  |  | (8.04) |  |  | (64) |  |  | (14.85) |
State and local income tax, net of federal income tax effect (1) | 4 |  |  | 0.66 |  |  | 33 |  |  | 3.11 |  |  | 9 |  |  | 2.11 |
Foreign tax effects | (4) |  |  | (0.68) |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of cross-border tax laws - subpart F income inclusion | 6 |  |  | 1.06 |  |  | — |  |  | — |  |  | — |  |  | — |
Changes in unrecognized tax benefits - state apportionment positions | (10) |  |  | (1.67) |  |  | 1 |  |  | 0.07 |  |  | 1 |  |  | 0.15 |
Other: |  |  |  |  |  |  |  |  |  |  |
Deferred tax remeasurement | 15 |  |  | 2.64 |  |  | — |  |  | — |  |  | — |  |  | — |
Discount on purchased tax credits | (4) |  |  | (0.64) |  |  | — |  |  | — |  |  | — |  |  | — |
Interest on federal refund | (5) |  |  | (0.93) |  |  | — |  |  | — |  |  | — |  |  | — |
Other adjustments | 3 |  |  | 0.56 |  |  | 5 |  |  | 0.48 |  |  | — |  |  | — |
Income tax expense | $ | 62 |  |  | 10.60 | % |  | $ | 175 |  |  | 16.62 | % |  | $ | 36 |  |  | 8.41 | %
(1)State taxes that made up the majority (greater than 50 percent) of the tax effect in this category were Pennsylvania in 2025, New Jersey, Pennsylvania and New York in 2024, and Pennsylvania, Hawaii and New Jersey in 2023. The One Big Beautiful Bill Act (“OBBBA”), enacted in July 2025, is expected to impact the Partnership primarily through the ability to take higher tax depreciation deductions via 100% expensing on eligible property and higher interest expense deductions via more favorable interest expense limitation calculations. We will continue to monitor regulatory guidance and interpretations, which could have a material impact on our financials condition and results of operations. Cash paid for taxes were as follows:
|  | Year Ended December 31,
|  | 2025 |  | 2024 |  | 2023
Cash paid for income taxes, net of refunds (excluding federal tax credits purchased from non-governmental third parties) |  |  |  |  |  |
Federal |  | $ | (68) |  |  | $ | 105 |  |  | $ | 21 |
State |  |  |  |  |  |
Pennsylvania |  | 2 |  |  | 7 |  |  | 2 |
New Jersey |  | 2 |  |  | 12 |  |  | 3 |
Other |  | 3 |  |  | 11 |  |  | 3 |
Foreign |  |  |  |  |  |
Canada |  | 62 |  |  | — |  |  | — |
Other |  | 2 |  |  | — |  |  | — |
Total |  | $ | 3 |  |  | $ | 135 |  |  | $ | 29 |
Cash paid for federal tax credits purchased from non-governmental third parties |  | $ | 41 |  |  | $ | 47 |  |  | $ | — |
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The principal components of deferred tax assets and liabilities were as follows:
| December 31, 2025 |  | December 31, 2024
Deferred income tax assets: |  |  |
Net operating losses, credits and other carryforwards | $ | 233 |  |  | $ | 16 |
Other | 45 |  |  | 18 |
Total deferred income tax assets | 278 |  |  | 34 |
Valuation allowance | (62) |  |  | — |
Net deferred income tax assets | 216 |  |  | 34 |
Deferred income tax liabilities: |  |  |
Property, plant and equipment | 846 |  |  | 49 |
Trademarks and other intangibles | 239 |  |  | 82 |
Investments in affiliates | 54 |  |  | 53 |
Other | 38 |  |  | 1 |
Total deferred tax liabilities | 1,177 |  |  | 185 |
Net deferred income tax liabilities | $ | 961 |  |  | $ | 151 |
The completion of the Parkland transaction significantly increased the deferred tax assets (liabilities). The table below provides a rollforward of the net deferred income tax liability as follows:
| December 31, 2025 |  | December 31, 2024
Net deferred income tax liability, beginning of year | $ | (151) |  |  | $ | (166) |
Acquired via Parkland Acquisition | (755) |  |  | — |
Acquired via NuStar Acquisition | — |  |  | (3) |
Tax accrual | (55) |  |  | 18 |
Net deferred income tax liability, end of year | $ | (961) |  |  | $ | (151) |
As of December 31, 2025, Sunoco Retail had federal NOL carryforwards of $287 million, that may be carried forward indefinitely. Of this amount, $206 million is subject to limitations under IRC §382 (ownership-change limitation) and $35 million is limited under Separate Return Limitation Year (“SRLY”) rules. Although these federal NOLs are expected to be fully utilized, the amount utilized in a particular year may be limited. Sunoco Retail's foreign subsidiaries had NOL carryforwards of $425 million, of which, $279 million expire between 2026 and 2045. Our corporate subsidiaries have state NOL carryforward benefits of $6 million, net of federal tax, with some expiring between 2026 and 2044 and others carried forward indefinitely. Our corporate subsidiaries have cumulative excess business interest expense carryforwards of $159 million available for indefinite carryforward, all of which is limited under IRC §382. Although the excess business interest expense carryforwards are expected to be fully utilized, the amount utilized in a particular year may be limited. For the year ended December 31, 2025, the net change in the total valuation allowances was an increase of $62 million, and for the year ended December 31, 2024, there was no net change. Valuation allowances totaling $52 million and $10 million are attributable to foreign and federal NOLs, respectively. The following table sets forth the changes in unrecognized tax benefits:
| December 31, 2025 |  | December 31, 2024
Balance at beginning of year | $ | 11 |  |  | $ | 11 |
Reduction attributable to tax positions taken in prior years | (8) |  |  | — |
Balance at end of year | $ | 3 |  |  | $ | 11 |
As of December 31, 2025, we h ad $3 million ($2 million after federal income tax benefits) related to tax positions which, if recognized, would impact our effective tax rate. During 2025, the Partnership recognized an $8 million tax benefit associated with certain prior tax positions that previously did not meet the criteria for recognition in the Partnership's consolidate d financial statements. We accrue interest and pen alties on income tax underpayments (overpayments) as a component of income tax expense. During 2025, we recognized interest and penalties of $3 million. At December 31, 2025, we had interest and penalties accrued of $1 million, net of taxes. The IRS closed its audit of a 2018 income tax refund claim filed by a wholly owned subsidiary of Sunoco with no change. In general, Sunoco and its U.S. subsidiaries are no longer subject to examination by the IRS and most state jurisdictions for the 2020 and prior tax years. Sunoco’s non-U.S. subsidiaries may be subject to examination in their local taxing jurisdictions for periods ranging from 3 to 12 years from the date the tax return is filed.

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