NOTE G — INCOME TAXES

As a partnership, we are generally not subject to income taxes at the entity level because our income is included in the tax returns of our partners. Our operations are treated as a partnership for federal tax purposes with each partner being separately taxed on its share of taxable income. However, a portion of our business is conducted through taxable U.S. corporate subsidiaries. Accordingly, a U.S. federal and state income tax provision has been reflected in the accompanying statements of operations. We have a tax sharing agreement with TETRA with respect to the Texas franchise tax liability. The resulting state tax expense is included in the provision for income taxes. Certain of our operations are located outside of the U.S., and the Partnership is responsible for income taxes in these countries.

The income tax provision attributable to our operations for the years ended December 31, 2014, 2013, and 2012 consists of the following:



	Year Ended December 31,
	2014			2013			2012
	(In Thousands)
Current
Federal	$	(50	)	$	846		$	420
State	172			150			157
Foreign	2,220			1,528			846
	2,342			2,524			1,423
Deferred
Federal	(2,764		)	(438		)	471
State	(122		)	(49		)	28
Foreign	(628		)	221			1,431
	(3,514		)	(266		)	1,930
Total tax provision (benefit)	$	(1,172	)	$	2,258		$	3,353

A reconciliation of the provision for income taxes attributable to continuing operations, computed by applying the federal statutory rate for the years ended December 31, 2014, 2013, and 2012 to income before income taxes and the reported income taxes, is as follows:



	Year Ended December 31,
	2014			2013			2012
	(In Thousands)
Income tax provision computed at statutory federal income tax rates	$	3,429		$	6,939		$	6,889
Partnership earnings	(3,429		)	(6,939		)	(6,889		)
Corporate subsidiary earnings (loss) subject to federal tax	(2,917		)	405			924
Income tax expense attributable to foreign earnings	1,592			1,749			2,277
State income taxes (net of federal benefit)	97			89			132
Nondeductible expenses	56			15			20
Total tax provision (benefit)	$	(1,172	)	$	2,258		$	3,353

Income before income tax provision includes the following components:



	Year Ended December 31,
	2014		2013		2012
	(In Thousands)
Domestic	$	2,578	$	9,883	$	8,333
International	7,507		9,942		11,351
Total	$	10,085	$	19,825	$	19,684

We file U.S. federal, state, and foreign income tax returns on behalf of all of our consolidated subsidiaries. With few exceptions, we are not subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years prior to 2007. We file tax returns in the U.S. and in various state, local and non-U.S. jurisdictions. The following table summarizes the earliest tax years that remain subject to examination by taxing authorities in any major jurisdiction in which we operate:



Jurisdiction	Earliest Open Tax Period
United States – Federal	2011
United States – State and Local	2011
Non-U.S. jurisdictions	2008

We use the liability method for reporting income taxes, under which current and deferred tax assets and liabilities are recorded in accordance with enacted tax laws and rates. Under this method, at the end of each period, the amounts of deferred tax assets and liabilities are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. We will establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. While we consider future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, there can be no guarantee that we will be able to realize all of our deferred tax assets. Significant components of our deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows:

Deferred Tax Assets



	December 31,
	2014			2013
	(In Thousands)
Accruals	$	1,132		$	4
Net operating losses	8,903			1,229
Bad debt reserve	374			64
Total deferred tax assets	10,409			1,297
Valuation allowance	(2,217		)	—
Net deferred tax assets	$	8,192		$	1,297

Deferred Tax Liabilities



	December 31,
	2014		2013
	(In Thousands)
Accruals	$	1,117	$	2,332
Excess book over tax basis in property, plant, and equipment	7,416		4,553
All other	976		29
Total deferred tax liability	9,509		6,914
Net deferred tax liability	$	1,317	$	5,617

At December 31, 2014, we have approximately $8.9 million of federal, foreign, and state net operating loss carryforwards/carrybacks. In those foreign jurisdictions and states in which net operating losses are subject to an expiration period, our loss carryforwards, if not utilized, will expire from 2019 to 2034.

The increase in the valuation allowance during the years ended December 31, 2014, 2013, and 2012 were $2.2 million, $0 million, and $0 million, respectively. We believe it is more likely than not we will not realize all the tax benefits of our deferred tax assets. Therefore, an appropriate valuation allowance has been provided. The change in the valuation allowance during 2014 primarily relates to the net deferred tax assets of the foreign subsidiaries acquired as part of the CSI Acquisition. These net deferred tax assets and associated valuation allowances were accounted for in connection with the purchase price allocation.

ASC 740 provides guidance on measurement and recognition in accounting for income tax uncertainties and provides related guidance on derecognition, classification, disclosure, interest, and penalties. As of December 31, 2014, the Partnership had no material unrecognized tax benefits (as defined in ASC 740-10). We do not expect to incur interest charges or penalties related to our tax positions, but if such charges or penalties are incurred, our policy is to account for interest charges as interest expense and penalties as tax expense in the consolidated statements of operations.