20. Income Taxes

We are not a taxable entity for federal income tax purposes. As such, we do not directly pay federal income taxes. Other than with respect to our corporate subsidiaries and the Texas Margin Tax, our taxable income or loss is includible in the federal income tax returns of each of our partners.

A few of our operations are owned by wholly-owned corporate subsidiaries that are taxable as corporations. We pay federal and state income taxes on these operations. In May 2006, the State of Texas enacted a law which requires us to pay a tax of 0.5% on our "margin," as defined in the law. The "margin" to which the tax rate is applied generally is calculated as our revenues (for federal income tax purposes) less the cost of the products sold (for federal income tax purposes), in the State of Texas.

Our income tax (benefit) expense is as follows:


	Year Ended December 31,
	2011			2010			2009
Current:
Federal	$	2,147		$	1,664		$	1,458
State		676			1,494			1,442

Total current income tax expense		2,823			3,158			2,900


Deferred:
Federal		(3,714	)		(573	)		168
State		(326	)		3			12

Total deferred income tax (benefit) expense		(4,040	)		(570	)		180

Total income tax (benefit) expense	$	(1,217	)	$	2,588		$	3,080

Deferred income taxes relate to temporary differences based on tax laws and statutory rates in effect at the balance sheet date. Deferred tax assets and liabilities consist of the following:


	December 31,
	2011			2010
Deferred tax assets:
Current:
Other current assets	$	351		$	445
Other		8			8

Total current deferred tax asset		359			453

Net operating loss carryforwards		2,363			862

Total long-term deferred tax asset		2,363			862

Valuation allowances		(428	)		(416	)

Total deferred tax assets		2,294			899


Deferred tax liabilities:
Current:
Other		(211	)		(213	)

Long-term:
Fixed assets		(5,744	)		(7,807	)
Intangible assets		(6,805	)		(7,386	)

Total long-term liability		(12,549	)		(15,193	)

Total deferred tax liabilities		(12,760	)		(15,406	)

Total net deferred tax liability	$	(10,466	)	$	(14,507	)

We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. We have provided a valuation allowance for state net operating loss carryforwards.

Our income tax (benefit) expense varies from the amount that would result from applying the federal statutory income tax rate to income (loss) before income taxes as follows:


	Year Ended December 31,
	2011			2010			2009
Income (loss) before income taxes	$	50,032		$	(47,953	)	$	9,258
Partnership (income) loss not subject to tax		(60,304	)		47,357			(7,822	)

Income (loss) subject to income taxes		(10,272	)		(596	)		1,436

Tax (benefit) expense at federal statutory rate	$	(3,595	)	$	(209	)	$	503
State income taxes, net of federal benefit		123			583			991
Effects of unrecognized tax positions, federal and state		1,964			1,909			1,733
Return to provision, federal and state		72			257			(224	)
Other		219			48			77

Income tax expense (benefit)	$	(1,217	)	$	2,588		$	3,080

Effective tax rate on income (loss) before income taxes		(1	)		(1	)		33	%

(1)	Income tax expense is related to taxable income generated by our corporate subsidiaries and Texas Margin Tax. Due to the income tax benefit in 2011 and the loss before income taxes in 2010, the effective tax rate as a percentage of our total income (loss) before income taxes is not meaningful.

A reconciliation of the beginning and ending amount of our unrecognized tax positions was as follows:

		0000000
Balance at January 1, 2009	$	2,599
Additions based on tax positions related to current year		1,733

Balance at December 31, 2009		4,332
Additions based on tax positions related to current year		1,909

Balance at December 31, 2010		6,241
Additions based on tax positions related to current year		1,964

Balance at December 31, 2011	$	8,205

If the unrecognized tax positions at December 31, 2011 were recognized, $8.2 million would affect our effective income tax rate. At December 31, 2011, our unrecognized tax positions are included in other liabilities.