INCOME TAXES

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“the Act”). The Act, which is also commonly referred to as “U.S. tax reform,” significantly changes U.S. corporate income tax laws by, among other things, reducing the U.S. corporate tax rate from 35% to 21% starting in 2018. As a result, we recorded an expense of $2.0 million in the fourth quarter of 2017, which is included “Income tax (expense) benefit” in the consolidated statements of comprehensive income. The expense results from the revaluation of our net deferred tax assets based on the new lower corporate income tax rate. Our accounting for the corporate tax rate reduction is complete. The Act is expected to have minimal impact to future years.

Components of income tax (expense) benefit were as follows:



	Year Ended December 31,
	2017			2016			2015
	(Thousands of Dollars)
Current:
U.S. federal	$	—		$	—		$	—
U.S. state	(1		)	(9		)	51
Total current	(1		)	(9		)	51
Deferred:
U.S. federal	(1,858		)	76			(940		)
U.S. state	21			(1		)	(12		)
Total deferred	(1,837		)	75			(952		)
Total income tax (expense) benefit	$	(1,838	)	$	66		$	(901	)

The difference between income tax expense recorded in our consolidated statements of income and income taxes computed by applying the statutory federal income tax rate (35% for all years presented) to income before income tax expense is due to the fact that the majority of our income is not subject to federal income tax based on our status as a limited liability company.

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:



	December 31,
	2017			2016
	(Thousands of Dollars)
Deferred income tax assets:
Capital loss	$	807		$	1,344
Net operating loss	3,131			5,239
Foreign tax credits	74			74
Other	137			80
Total deferred income tax assets	4,149			6,737
Less: Valuation allowance	(881		)	(1,418		)
Net deferred income tax assets	3,268			5,319

Deferred income tax liabilities:
Investment in Riverwalk Logistics, L.P. and NuStar Energy	(19		)	(233		)

Total net deferred income tax assets	$	3,249		$	5,086

As of December 31, 2017, our U.S. corporate operations have net operating loss carryforwards and capital loss carryforwards for tax purposes totaling approximately $14.9 million and $3.8 million, respectively, which are subject to a twenty-year and a five-year carryforward limitation, respectively, and begin to expire in 2031 and 2018, respectively.

As of December 31, 2017 and 2016, we have a valuation allowance of $0.9 million and $1.4 million, respectively, related to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income and the period over which we can utilize those future deductions. The valuation allowance reflects uncertainties related to our ability to utilize certain capital loss carryforwards and foreign tax credits before they expire.

The realization of deferred income tax assets recorded as of December 31, 2017 is dependent upon our ability to generate future taxable income in the United States. We believe it is more likely than not that the deferred income tax assets as of December 31, 2017 will be realized, based upon expected future taxable income and potential tax planning strategies.