INCOME TAXES

For periods following PBF Energy’s IPO, PBF Energy is required to file federal and applicable state corporate income tax returns and recognizes income taxes on its pre-tax income, which to-date has consisted primarily of its share of PBF LLC’s pre-tax income (see “Note 14 - Stockholders’ and Members’ Equity Structure”). PBF LLC is organized as a limited liability company and PBFX is a master limited partnership, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income taxes apart from the income tax attributable to two subsidiaries of Chalmette Refining and one subsidiary of PBF Holding that are treated as C-Corporations for income tax purposes. As a result, PBF Energy’s consolidated financial statements do not reflect any benefit or provision for income taxes on the pre-tax income or loss attributable to the noncontrolling interests in PBF LLC or PBFX apart from the income tax benefit of $7,264 and income tax expense of $1,378 for the years ended December 31, 2017 and 2016, respectively, attributable to those two C-Corporation subsidiaries of Chalmette Refining and income tax benefit of $3,520 and $8,412 for the years ended December 31, 2017 and 2016 attributable to the subsidiary of PBF Holding.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the TCJA. The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”); (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (“BEAT”), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

In connection with our initial analysis of the impact of the TCJA, the Company has recorded a net tax expense of $20,153 in the year ending December 31, 2017 as further discussed below. It is the Company’s expectation that the other legislative areas within TCJA, such as the Transition Tax and BEAT, will not have a material impact on the provision for income taxes.

The Company does not expect the new legislation to have any impact on the need for a valuation allowance. Given the reversing taxable temporary differences and the history of generating book income, no valuation allowances have been provided. The Company has estimated and recognized the measurement of the tax effects related to the TCJA based on the facts and interpretations of the legislation that currently exist. However, such estimates of the tax effects may be subject to change upon future updates to guidance or interpretations issued by the IRS.

The income tax provision in the PBF Energy consolidated financial statements of operations consists of the following:



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
Current expense (benefit):
Federal	$	1,534		$	(87,829	)	$	77,954
Foreign	75			—			—
State	142			(19,279		)	14,378
Total current	1,751			(107,108		)	92,332

Deferred expense (benefit):
Federal	250,042			205,502			(27,046		)
Foreign	(3,595		)	(8,412		)	28,157
State	67,386			47,668			(6,718		)
Total deferred	313,833			244,758			(5,607		)
Total provision for income taxes	$	315,584		$	137,650		$	86,725

The difference between the PBF Energy’s effective income tax rate and the United States statutory rate is reconciled below:



	Year Ended December 31, 2017		Year Ended December 31, 2016		Year Ended December 31, 2015

Provision at Federal statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) attributable to flow-through of certain tax adjustments:
State income taxes (net of federal income tax)	4.6	%	4.6	%	4.6	%
Nondeductible/nontaxable items	0.2	%	0.1	%	0.2	%
Manufacturer’s benefit deduction	—	%	1.9	%	(2.3	)%
Rate differential from foreign jurisdictions	0.3	%	1.5	%	(6.3	)%
Provision to return adjustment	—	%	(0.4	)%	—	%
Adjustment to deferred tax assets and liabilities for change in tax rates	2.8	%	1.7	%	5.1	%
Other	0.3	%	0.2	%	0.9	%
Effective tax rate	43.2	%	44.6	%	37.2	%

The Company’s effective income tax rate for the years ended December 31, 2017, 2016 and 2015 including the impact of income attributable to noncontrolling interests of $67,914, $54,707 and $49,132 respectively, was 39.5%, 37.9% and 30.7% respectively.

The company made a one-time adjustment to deferred tax assets and liabilities in relation to the TCJA. The net result of the adjustment was a charge of approximately $20,153, or an increase to the tax rate of 2.8%. Under GAAP, the Company is required to recognize the effect of the TCJA in the period of enactment. The net income tax expense consists of a net tax expense of $193,499 associated with the remeasurement of Tax Receivable Agreement associated deferred tax assets and a net tax benefit of $173,346 for the reduction of our deferred tax liabilities as a result of the TCJA.

Adjustments to deferred tax assets and liabilities for changes in tax rates in 2016 and 2015 were a result of changes in business mix, including the 2016 acquisition of the Torrance refinery and related logistics assets in California.

For years starting before January 1, 2018, the Company’s foreign earnings are taxed at a lower income tax rate as compared to its domestic operations. Accordingly, the Company recognized an income tax expense in 2017 as its foreign entity’s operations resulted in a loss.

For financial reporting purposes, income (loss) before income taxes attributable to PBF Energy Inc. stockholders includes the following components:



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015

United States	$	749,559		$	343,875		$	170,829
Foreign	(18,458		)	(35,414		)	62,297
Total income before income taxes attributable to PBF Energy Inc. stockholders	$	731,101		$	308,461		$	233,126

A summary of the components of deferred tax assets and deferred tax liabilities follows:



	December 31, 2017		December 31, 2016
Deferred tax assets
Purchase interest step-up	$	325,405	$	639,340
Inventory	—		90,133
Pension, employee benefits and compensation	40,455		42,573
Hedging	24,175		8,696
Net operating loss carry forwards	137,887		128,283
Environmental liabilities	38,388		73,031
Other	3,709		5,859
Total deferred tax assets	570,019		987,915
Valuation allowances	—		—
Total deferred tax assets, net	570,019		987,915

Deferred tax liabilities
Property, plant and equipment	528,336		628,373
Inventory	21,200		22,269
Other	—		3,666
Total deferred tax liabilities	549,536		654,308
Net deferred tax assets	$	20,483	$	333,607

As of December 31, 2017, PBF Energy has federal and state income tax net operating loss carry forwards of $528,241 and $459,228, respectively, which will expire at various dates from 2027 through 2037. The Company has not recorded any valuation allowance against these assets, as it is deemed “more likely than not” that the deferred tax assets will be realized, based on the Company’s historical earnings, forecasted income, and the reversal of temporary differences.

Income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are all years including and subsequent to:



United States
Federal	2014
New Jersey	2013
Michigan	2013
Delaware	2014
Indiana	2014
Pennsylvania	2014
New York	2014
Louisiana	2015
California	2016

PBF Energy does not have any unrecognized tax benefits.