Provision For Income Taxes

12 Months Ended

Dec. 31, 2016

8. PROVISION FOR INCOME TAXES

Publicly traded partnerships like ours are treated as corporations unless they have 90% or more in qualifying income (as that term is defined in the Internal Revenue Code). We satisfied this requirement in each of the years ended December 31, 2016 and 2015 and, as a result, are not subject to federal income tax. However, our partners are individually responsible for paying federal income taxes on their share of our taxable income. Net earnings for financial reporting purposes may differ significantly from taxable income reportable to our unitholders as a result of differences between the tax basis and financial reporting basis of certain assets and liabilities and other factors. We do not have access to information regarding each partner's individual tax basis in our limited partner interests.

Provision for income taxes primarily reflects our state tax obligations under the Revised Texas Franchise Tax (the "Texas Margin Tax"). Deferred income tax assets and liabilities are recognized for temporary differences between the assets and liabilities of our tax paying entities for financial reporting and tax purposes.

Our federal, state and foreign income tax provision (benefit) is summarized below (in thousands):


	For the Years Ended December 31,
	2016		2015
Current:
Federal	$	—	$	2
State		—		53
Total current		—		55

Deferred:
Federal		—		—
State		—		—
Total deferred		—		—
Total provision for income taxes	$	—	$	55

A reconciliation of the provision for (benefit from) income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows (in thousands):


	For the Years Ended December 31,
	2016			2015
Pre-tax net book income (loss)	$	19,231		$	(137,001)
Texas Margin Tax (a)		255			(780)
Return to accrual		—			55
Valuation allowance		(255)			780
Provision for income taxes	$	—		$	55

Effective income tax rate		0.00	%		(0.04)	%

(a)

Although the Texas Margin Tax is not considered a state income tax, it has the characteristics of an income tax since it is determined by applying a tax rate to a base that considers our Texas-sourced revenues and expenses.

The following table presents the significant components of deferred tax assets and deferred tax liabilities at the dates indicated (in thousands):


	December 31,
	2016		2015
Deferred tax assets (liabilities):
Derivative assets	$	(230)	$	(63)
Depreciable, depletable property, plant and equipment		753		843
Other		2		—
Deferred tax assets:		525		780
Valuation allowance		(525)		(780)
Total Deferred tax assets	$	—	$	—

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position by jurisdiction rather than separately presented as current and non-current portions. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Partnership chose to adopt ASU 2015-17 as of the quarter ended December 31, 2015 on a retrospective basis.

As of December 31, 2016, and 2015, the Partnership had no material uncertain tax positions.