Income Taxes

3 Months Ended

Mar. 31, 2020

INCOME TAXES



	Three Months Ended March 31,
	2020		2019
Provision for income taxes	$	347	$	696

The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners. MTI is subject to income taxes due to its corporate structure. Total income tax expense of $347, related to the operation of the subsidiary, for the three months ended March 31, 2020, resulted in an effective income tax rate of 32.17%.

Total income tax expense of $448, related to the operation of the subsidiary, for the three months ended March 31, 2019, resulted in an effective income tax rate of 24.79%. The increase in the effective income tax rate for income taxes during the three months ended March 31, 2020, compared to the three months ended March 31, 2019, is primarily due to an increase in permanent differences and a decrease in income before income taxes. The decrease in the provision for income taxes during the three months ended March 31, 2020, compared to the similar period in 2019, was primarily due to the impact of a decrease in income before income taxes in the current period.

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted on March 27, 2020, in response to the market volatility and instability resulting from the COVID-19 pandemic, and includes changes to various income tax provisions including, but not limited to, providing for a five-year carryback of net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, suspension of the 80% taxable income limitation for net operating losses generated after December 31, 2017, and before January 1, 2021, and relaxation of the limitation of adjusted taxable income as determined under Internal Revenue Code Section 163(j) from 30% to 50% when determining the deduction for business interest expense for 2019 and 2020. Since, prior to its acquisition by the Partnership, MTI was a Qualified Subchapter S subsidiary ("QSub") of Martin Resource Management Corporation, it is precluded from carrying back net operating losses to its QSub taxable years. The other applicable provisions of the CARES Act have no material impact on the annual effective tax rate ("AETR"), deferred taxes, or valuation allowances.

A current federal income tax expense (benefit) of $133 and $297, related to the operation of the subsidiary, were recorded for the three months ended March 31, 2020 and 2019, respectively. A current state income tax expense (benefit) of $(72) and $(218), related to the operation of the subsidiary, were recorded for the three months ended March 31, 2020 and 2019, respectively

With respect to MTI, income taxes are accounted for under the asset and liability method pursuant to the provisions of ASC 740 related to income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A deferred tax expense related to the MTI temporary differences of $286 and $369 was recorded for the three months ended March 31, 2020 and 2019, respectively. A deferred tax asset of $23,136 and $23,422, related to the cumulative book and tax temporary differences, existed at March 31, 2020 and December 31, 2019, respectively.

All income tax positions taken for all open years are more likely than not to be sustained based upon their technical merit under applicable tax laws.