4. Income Taxes

Pretax Income (Loss) and Income Tax Expense (Benefit). The tables below show the pretax income (loss) from continuing operations and the components of income tax expense (benefit) from continuing operations for the following periods:

	Successor					Predecessor
	Year ended December 31, 2013		March 23 (inception) to December 31, 2012			January 1 to May 24, 2012			Year ended December 31, 2011
	(in millions)
Pretax Income (Loss)
U.S.	$	39	$	(299	)	$	384		$	629
Foreign	—		—			(63		)	(1		)
	$	39	$	(299	)	$	321		$	628

Components of Income Tax Expense (Benefit)
Current
Federal	$	—	$	—		$	(62	)	$	(79	)
State	—		—			(3		)	1
	—		—			(65		)	(78		)

Deferred
Federal	—		—			188			302
State	—		—			11			19
	—		—			199			321
Total income tax expense	$	—	$	—		$	134		$	243

Effective Tax Rate Reconciliation. Income taxes included in net income differs from the amount computed by applying the statutory federal income tax rate of 35 percent for the following reasons for the following periods:

	Successor						Predecessor
	Year ended December 31, 2013			March 23 (inception) to December 31, 2012			January 1 to May 24, 2012			Year ended December 31, 2011
	(in millions, except rates)
Income taxes at the statutory federal rate of 35%	$	14		$	(105	)	$	112		$	220
Increase (decrease)
State income taxes, net of federal income tax effect	—			—			5			12
Partnership earnings not subject to tax	(14		)	105			—			—
Earnings from unconsolidated affiliates where we received or will receive dividends	—			—			(2		)	(8		)
Valuation allowances	—			—			—			15
Foreign income (loss) taxed at different rates	—			—			22			4
Other	—			—			(3		)	—
Income tax expense (benefit)	$	—		$	—		$	134		$	243
Effective tax rate	—		%	—		%	42		%	39		%

The effective tax rate for the successor period for the year ended December 31, 2013 and the period from March 23 (inception) to December 31, 2012 was significantly lower than the statutory rate as we are a limited liability company, treated as a partnership for federal and state income tax purposes, with income tax liabilities and/or benefits of the Company passed through to our members. The effective tax rate for the predecessor period from January 1, 2012 to May 24, 2012 was significantly higher than the statutory rate primarily due to the impact of an Egyptian non-cash charge without a corresponding tax benefit. For the year ended December 31, 2011, the effective tax rate was higher than the statutory rate primarily due to valuation allowances partially offset by the impact dividend exclusions on earnings from unconsolidated affiliates where the predecessor anticipated receiving dividends and the favorable resolution of certain tax matters related to the first half of 2011.

Deferred Tax Assets and Liabilities. In conjunction with the Acquisition, U.S. deferred taxes of the predecessor were settled with El Paso through a non-cash contribution. As a partnership, for U.S. federal and state income tax purposes, we do not record differences between the underlying tax and book basis of our assets and liabilities as deferred taxes.