Income Taxes

6 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

Note 8 - Income Taxes

We qualify as a partnership for income taxes.  As such, we will not pay any U.S. Federal income tax.  Rather, each owner will report their share of our income or loss on their individual tax returns.  Accordingly, no income tax provision has been recorded for the three months and six months ended September 30, 2011.  The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information regarding each partner’s basis in the Partnership.

As a publicly-traded partnership, we are allowed to have non-qualifying income up to 10% of our gross income and not be subject to taxation as a corporation.  During the three months and six months ended September 30, 2011, we formed a taxable corporate subsidiary and transferred to such subsidiary certain assets and operations that represent “non-qualifying income” for a partnership.  As a result, our taxable subsidiary will be subject to income taxes related to the taxable income generated by its operations.  During the three month and six month periods ended September 30, 2011, the operations of our corporate subsidiary were not significant.

NGL Supply’s deferred tax benefit for the three month and six month periods ended September 30, 2010 was computed using the expected annual effective tax rate which differs from the statutory rate due to the effect of state income taxes.