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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 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 may 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, 2020 and 2019, we had not recognized any material amounts in connection with uncertainty in income taxes. U.S. Federal and State Taxes Although we are organized as a limited partnership, we have elected to be treated as a corporation for U.S. federal income tax purposes and are therefore subject to both U.S. federal and state income taxes. Canadian Federal and Provincial Taxes All of our Canadian operations are conducted by entities that are treated as corporations for Canadian tax purposes (flow through for U.S. income 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,
| 2020 |  | 2019 |  | 2018
Current income tax expense: |  |  |  |  |
State income tax | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Canadian federal and provincial income tax | 51 |  |  | 109 |  |  | 63 |
Total current income tax expense | $ | 51 |  |  | $ | 112 |  |  | $ | 66 |
Deferred income tax expense/(benefit): |  |  |  |  |
Federal income tax | $ | (149) |  |  | $ | 89 |  |  | $ | 90 |
State income tax | 1 |  |  | 21 |  |  | 14 |
Canadian federal and provincial income tax | (70) |  |  | (46) |  |  | 132 |
Total deferred income tax expense/(benefit) | $ | (218) |  |  | $ | 64 |  |  | $ | 236 |
Total income tax expense/(benefit) | $ | (167) |  |  | $ | 176 |  |  | $ | 302 |
The difference between income tax expense based on the statutory federal income tax rate and our effective income tax expense is summarized as follows (in millions):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Income/(loss) before tax | $ | (2,607) |  |  | $ | 2,238 |  |  | $ | 2,409 |
Net (income)/loss attributable to noncontrolling interests | 1,872 |  |  | (1,731) |  |  | (1,773) |
Income taxes attributable to noncontrolling interests | 19 |  |  | (66) |  |  | (198) |
| $ | (716) |  |  | $ | 441 |  |  | $ | 438 |
Federal statutory income tax rate | 21 | % |  | 21 | % |  | 21 | %
Income tax expense/(benefit) at statutory rate | $ | (150) |  |  | $ | 93 |  |  | $ | 92 |
Deferred tax rate adjustment | 11 |  |  | 10 |  |  | 3 |
State income tax, net of federal benefit | (9) |  |  | 7 |  |  | 9 |
Income taxes attributable to noncontrolling interests: |  |  |  |  |
Canadian federal and provincial income tax | (19) |  |  | 63 |  |  | 195 |
State income tax | — |  |  | 3 |  |  | 3 |
Total income tax expense/(benefit) | $ | (167) |  |  | $ | 176 |  |  | $ | 302 |
The Canadian federal and provincial income tax for the year ended December 31, 2020 reflects the impact of permanent differences primarily related to an impairment of goodwill that was recognized during the year. A portion of the goodwill that was impaired had no basis for Canadian income tax purposes and thus was not a deductible expense in determining taxable income, resulting in a permanent difference for Canadian tax purposes. See Note 8 for additional information regarding this impairment. During the second quarter of 2019, the Alberta government enacted legislation that reduces the Alberta provincial corporate income tax rate from 12% to 8% over the period from July 1, 2019 through January 1, 2022. As a result, during the second quarter of 2019, we recognized a reduction of our deferred income tax liability of approximately $60 million and a corresponding deferred tax benefit. In the fourth quarter of 2020, the Alberta government changed the timing of the rate reduction to decrease the corporate income tax rate to 8% starting July 1, 2020. Deferred tax assets and liabilities are aggregated by the applicable tax paying entity and jurisdiction and result from the following (in millions):
| December 31,
| 2020 |  | 2019
Deferred tax assets: |  |  |
Investment in partnerships | $ | 917 |  |  | $ | 874 |
Net operating losses | 527 |  |  | 406 |
Derivative instruments | 45 |  |  | — |
Lease liabilities | 39 |  |  | 55 |
Other | 16 |  |  | 16 |
Total deferred tax assets | 1,544 |  |  | 1,351 |
Deferred tax liabilities: |  |  |
Property and equipment in excess of tax values | (475) |  |  | (472) |
Derivative instruments | — |  |  | (22) |
Lease assets | (38) |  |  | (53) |
Other | (3) |  |  | (5) |
Total deferred tax liabilities | (516) |  |  | (552) |
Net deferred tax assets | $ | 1,028 |  |  | $ | 799 |
Balance sheet classification of deferred tax assets/(liabilities): |  |  |
Deferred tax asset | $ | 1,444 |  |  | $ | 1,280 |
Other long-term liabilities and deferred credits | (416) |  |  | (481) |
| $ | 1,028 |  |  | $ | 799 |
As a result of the exchange of the ownership interest in AAP in connection with our IPO and all subsequent exchanges, a deferred tax asset was created. These transfers of ownership were accounted for at the historical carrying basis for GAAP accounting purposes, but were recorded at the fair market value of the Class A shares at the time of exchange for U.S. federal income tax purposes. The resulting basis difference resulted in a deferred tax asset that was recorded as a component of partners’ capital as it results from transactions among shareholders. The deferred tax asset is amortized to deferred income tax expense as the associated basis step-up is realized on our tax returns. Also, in connection with the repurchase of common units by PAA and the associated adjustment to partners’ capital attributable to PAGP, a corresponding change to the deferred tax balance was recorded to partners’ capital. See Note 12 for additional information regarding exchanges and the repurchase of common units by PAA. As of December 31, 2020, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $2,328 million, $690 million and $9 million, respectively. If not utilized, the state and foreign net operating losses will begin to expire in 2021 and 2034, respectively, and a portion of our federal net operating losses will begin to expire in 2033. Under the Tax Act, U.S. federal NOLs generated after 2017 will have an indefinite carryforward period but may only reduce up to 80% of taxable income in any given year. Our U.S. federal NOLs generated prior to 2018 will not be subject to the taxable income limitation and will remain subject to a 20 year carryforward period. Generally, tax returns for our Canadian entities are open to audit from 2016 through 2020. Our U.S. and state tax years are generally open to examination from 2017 to 2020. As of December 31, 2020, in reference to tax years 2008 to 2015, we had received notices of reassessment (“notices”) from the Canada Revenue Agency and the Alberta Tax and Revenue Administration (the “Canadian Tax Authorities”) related primarily to transfer pricing associated with cross-border intercompany financing transactions. These notices include assessments, including penalties and interest, associated with these transfer pricing matters totaling approximately $91 million (based on the exchange rate as of December 31, 2020). Payment of a portion of the assessment is required in order to file a notice of objection to dispute the reassessment. Accordingly, we have remitted approximately $64 million (based on the exchange rate as of December 31, 2020) related to the assessments, which is included in “Other long-term assets, net,” on our Consolidated Balance Sheets. We disagree with these notices and have contested the reassessments. We intend to vigorously defend our position, and we plan to pursue all remedies available to us to successfully resolve these matters, including administrative remedies with the Canadian Tax Authorities, and judicial remedies, if necessary. As of December 31, 2020, we believe that our tax position associated with these matters is “more likely than not” to be sustained and have not recognized any amounts for uncertainty in income taxes related to these notices.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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