Income Taxes (Notes)

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

(6) Income Taxes

The Predecessor’s historical combined financial statements include U.S. federal and state income tax expense and related deferred tax liabilities. As a result of the business combination, the Predecessor was reorganized and Midstream Holdings is treated as a partnership and no longer subject to federal and certain state income taxes on or subsequent to March 7, 2014, the transaction date.

As of the transaction date, ENLC owned a 50% direct partnership interest in Midstream Holdings and indirectly owned an additional interest of approximately 3% through its ownership in the Partnership which owns the other 50% interest in Midstream Holdings. ENLC assumed a carryover basis in Midstream Holdings' assets and, therefore, assumed $252.0 million of deferred tax liability in the business combination. This amount represents approximately 53% of Midstream Holdings' deferred tax liability at closing related to the difference between the book basis and the tax basis of Midstream Holdings' assets. The deferred tax liability of $215.5 million related to the 47% of Midstream Holdings not owned by ENLC was reflected as a reduction in the deferred tax liability and an increase in non-controlling interest through equity at closing.

The Company provides for income taxes using the liability method. Accordingly, deferred taxes are recorded for the differences between the tax and book basis that will reverse in future periods (in millions).

	Three Months Ended  September 30, 2014		Nine Months Ended  September 30, 2014
Predecessor tax provision	$	—	$	19.4
ENLC tax provision	17.3		40.1
Tax provision	$	17.3	$	59.5

The principal component of the Company's net deferred tax liability is as follows (in millions):

	September 30, 2014
Deferred income tax assets:
Inventory	$	0.2
Accrued expenses	0.3
Asset retirement obligations	2.2
Net operating loss carryforward-non current	23.9
Total deferred tax assets	26.6
Deferred income tax liabilities:
Property, plant, equipment, and intangibles assets-long term	(515.1		)
Other assets	(8.1		)
Total deferred tax liabilities	(523.2		)
Net deferred tax liability	$	(496.6	)

At September 30, 2014, the Company had a net operating loss carryforward of approximately $61.9 million that expires from 2027 through 2034. The Company also has various state net operating loss carryforwards of approximately $75.4 million which will begin expiring in 2027. Management believes that it is more likely than not that the future results of operations will generate sufficient taxable income to utilize these net operating loss carryforwards before they expire.

Deferred tax liabilities relating to property, plant, equipment and intangible assets represent, primarily, the Company's share of the book basis in excess of tax basis for assets inside of the Partnership and Midstream Holdings.