Income Taxes

12 Months Ended

Dec. 31, 2019

(7) Income Taxes

The components of our income tax benefit (expense) are as follows (in millions):



	Year Ended December 31,
	2019			2018			2017
Current income tax expense	$	—		$	(1.9	)	$	(0.4	)
Deferred tax benefit (expense)	(6.9		)	(16.3		)	197.2
Total income tax benefit (expense)	$	(6.9	)	$	(18.2	)	$	196.8

The following schedule reconciles total income tax benefit (expense) and the amount calculated by applying the statutory U.S. federal tax rate to income before income taxes (in millions):



	Year Ended December 31,
	2019			2018			2017
Expected income tax benefit (expense) based on federal statutory tax rate (1)	$	233.6		$	(1.0	)	$	(5.6	)
State income tax benefit (expense), net of federal benefit	27.0			(0.1		)	(0.4		)
Statutory rate change (1)	—			—			210.6
Non-deductible expense related to impairments	(264.5		)	(10.7		)	—
Other	(3.0		)	(6.4		)	(7.8		)
Total income tax benefit (expense)	$	(6.9	)	$	(18.2	)	$	196.8

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(1)

The Tax Cuts and Jobs Act of 2017 resulted in a change in the federal statutory corporate tax rate from 35% to 21%, effective January 1, 2018. Accordingly, we reduced deferred tax liabilities and recorded a deferred tax benefit in the amount of $210.6 million as of December 31, 2017 due to a remeasurement of deferred tax liabilities. Of this amount, $185.7 million was related to ENLC’s standalone deferred tax liabilities, and $24.9 million was related to ENLK’s re-measurement of deferred tax liabilities of its wholly-owned corporate subsidiaries.

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets, net of deferred tax liabilities, are included in “Other assets, net” in the consolidated balance sheets at December 31, 2019. Our deferred income tax assets and liabilities as of December 31, 2019 and 2018 are as follows (in millions):



	December 31, 2019			December 31, 2018
Deferred income tax assets:
Federal net operating loss carryforward	$	341.4		$	67.9
State net operating loss carryforward	44.8			11.7
Total deferred tax assets	386.2			79.6
Deferred tax liabilities:
Property, plant, equipment, and intangible assets (1)	(354.0		)	(440.6		)
Other	—			(1.4		)
Total deferred tax liabilities	(354.0		)	(442.0		)
Deferred tax asset (liability), net	$	32.2		$	(362.4	)

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(1)	Includes our investment in ENLK and primarily relates to differences between the book and tax bases of property and equipment.

As a result of the Merger, we acquired all issued and outstanding ENLK common units that were not already held by us or our subsidiaries in exchange for the issuance of ENLC common units. See “Note 1—Organization and Summary of Significant Agreements” for more information regarding this transaction. This was a taxable exchange to our unitholders, and we received a step-up in tax basis of the underlying assets acquired. In accordance with ASC 810, Consolidation, the step-up in our basis reduced our deferred tax liability by $399.0 million at the time of the Merger.

As of December 31, 2019, we had federal net operating loss carryforwards of $1.6 billion that represent a net deferred tax asset of $341.4 million. As of December 31, 2019, we had state net operating loss carryforwards of $816.2 million that represent a net deferred tax asset of $44.8 million. These carryforwards will begin expiring in 2028 through 2039. 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.

For the years ended December 31, 2019 and 2018, there was no recorded unrecognized tax benefit. Per our accounting policy election, penalties and interest related to unrecognized tax benefits are recorded to income tax expense. As of December 31, 2019, tax years 2015 through 2019 remain subject to examination by various taxing authorities.