(17) Commitments and Contingencies

(a)

Leases

We maintain both capital leases and operating leases, primarily related to office space, warehouse facilities and certain corporate equipment. We held $7.6 million and $7.6 million of capital leases, in property and equipment as of December 31, 2018 and 2017, respectively, representing the present value of the future minimum lease payments over the term of the lease determined at the inception of the lease and $4.9 million and $3.8 million of accumulated amortization on assets recorded under capital leases, respectively. Amortization expense on assets recorded under capital leases is included within depreciation and amortization expense on the consolidated statements of operations. We recorded $1.1 million and $1.2 million as of December 31, 2018 and 2017, respectively, as the current portion of the lease obligation, which is included in accrued liabilities, and $2.1 million and $3.2 million as of December 31, 2018 and 2017, respectively, as the long-term portion of the lease obligation, included in other non-current liabilities on the consolidated balance sheets.

Total rent expense for operating leases, including those leases with terms of less than one year, was $4.4 million, $3.6 million and $4.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Commitments for future minimum lease payments for non-cancelable leases, with lease terms in excess of one year, are as follows (in thousands):


2019	$	3,773
2020		1,563
2021		854
2022		569
2023		509
Thereafter		642
Total minimum lease payments	$	7,910
Less: Amount representing minimum operating lease payments		(3,938)
Total minimum capital lease payments		3,972
Less: Amount representing estimated taxes, maintenance and insurance costs included in total amounts above		(652)
Net minimum capital lease payments		3,320
Less: Amount representing interest		(121)
Present value of net minimum lease payments	$	3,199
Less: Current maturities of capital lease obligations		(1,085)
Long-term capital lease obligations	$	2,114

(b)

Major Customers

Neither we nor the USA Compression Predecessor had revenue from any single customer representing 10% or more of total revenue for the years ended December 31, 2018, 2017 or 2016.

(c)

Litigation

From time to time, we and our subsidiaries may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

(d)

Equipment Purchase Commitments

Our future capital commitments are comprised of binding commitments under purchase orders for new compression units ordered but not received. The commitments as of December 31, 2018 were $107.5 million, all of which is expected to be settled within the next twelve months.

(e)

Sales Tax Contingency

Our compliance with state and local sales tax regulations is subject to audit by various taxing authorities. The Office of the Texas Comptroller of Public Accounts (“Comptroller”) has claimed that specific operational processes, which we and others in our industry regularly conduct, result in transactions that are subject to state sales taxes. We and other companies in our industry have disputed these claims based on existing tax statutes which provide for manufacturing exemptions on the transactions in question. The manufacturing exemptions are based on the fact that our natural gas compression equipment is used in the process of treating natural gas for ultimate use and sale.

The USA Compression Predecessor has several open audits with the Comptroller for certain periods prior to the Transactions Date wherein the Comptroller has challenged the applicability of the manufacturing exemption. Any liability for the periods prior to the Transactions Date will be covered by an indemnity between us and ETP. As of December 31, 2018, we have recorded a $44.9 million accrued liability and $44.9 million related party receivable from ETP.

During the year ended December 31, 2018, we entered into a compromise and settlement agreement with the Comptroller for the audit of the Partnership for the period from January 2009 to August 2012 for a $0.2 million refund to the Partnership.

(f)

Environmental

The Partnership’s operations are subject to federal, state and local laws and rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws, rules and regulations require the Partnership to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with applicable environmental laws, rules and regulations may expose the Partnership to significant fines, penalties and/or interruptions in operations. The Partnership’s environmental policies and procedures are designed to achieve compliance with such applicable laws and regulations. These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future.