Income Taxes (Notes)

12 Months Ended

Dec. 31, 2018

Income from continuing operations before income taxes for years ended December 31, 2018, 2017, and 2016 were $137.8 million, $71.3 million, and $93.8 million, respectively.

Components of our income tax provision are as follows:


Year Ended December 31,	2018	2017	2016
(In millions of Canadian dollars)
Current tax expense (benefit)	43.1	6.8	0.4
Deferred tax expense	(5.3)	14.0	23.0
Total tax provision	37.8	20.8	23.4

The difference between the statutory income tax rate and our effective income tax rate is summarized as follows:


Year Ended December 31,	2018				2017					2016
(In millions of Canadian dollars, except percentages)
Statutory income tax	37.2	27.0	%	19.2	27.0	%	25.3	27.0	%
Increase (decrease) as a result of:
Capital gains deduction	—	—	%	—	—	%	(2.0)	(2.1)	%
Valuation allowance	(0.2)	(0.1)	%	—	—	%	(2.0)	(2.1)	%
Tax impact on the future tax rate change	—	—	%	0.8	1.1	%	1.9	2.0	%
Inter-corporate charges not tax deducted	2.4	1.7	%	2.2	3.1	%	(0.3)	(0.3)	%
Other	(1.6)	(1.2)	%	(1.4)	(2.0)	%	0.5	0.5	%
Total	37.8	27.4	%	20.8	29.2	%	23.4	25.0	%

Deferred tax assets and liabilities result from the following:


December 31,	2018	2017
(In millions of Canadian dollars)
Deferred tax assets


Non capital losses	0.1	—
Reserves	35.8	43.0
Capital losses	0.2	27.2
Investment in partnerships	144.4	117.4
Valuation allowances	(144.6)	(144.5)
Total deferred tax assets	35.9	43.1
Deferred tax liabilities
Property, plant and equipment	(36.0)	(392.0)


Total deferred tax liabilities	(36.0)	(392.0)
Net non-current deferred tax liability	(0.1)	(348.9)

Deferred Tax Assets and Valuation Allowances: We have deferred tax assets of $0.1 million related to non-capital loss carryovers, $0.2 million capital loss carryovers and $0.2 million of valuation allowances related to these deferred tax assets as of December 31, 2018. As of December 31, 2017, we had deferred tax assets of $27.2 million for capital loss carryovers and $27.1 million of valuation allowances related to these deferred tax assets.

Expiration Periods for Deferred Tax Assets: As of December 31, 2018, we have non-capital loss carryforwards of $0.3 million which will expire in 2038 and capital loss carryforwards of $1.8 million which can be carried forward indefinitely.

Unrecognized Tax Benefits: We had no unrecognized tax benefits as of December 31, 2018 and 2017.

As a result of our IPO and subsequent revaluation (or rebalancing) of our investment in the Limited Partnership, our tax basis exceeds our accounting basis in our investment in the Limited Partnership by approximately $1.1 billion. This excess tax basis results in a deferred tax asset of approximately $144.4 million. A full valuation allowance was recorded against this deferred tax asset as we determined it was more likely than not to not be realized.

Income Tax Expense on Discontinued Operations: Income tax expense in respect of our Discontinued Operations, includes income tax expense on the Trans Mountain Asset Group earnings for the periods presented until August 31, 2018, and the Trans Mountain Transaction gain. As of December 31, 2018 and 2017, our effective tax rate on income from Discontinued Operations was (5.2)%, and 28.3%, respectively. The 2018 effective tax rate on our income from Discontinued Operations is lower than the statutory federal and provincial rate due to the taxable gain being eligible for a 50.0% capital gains deduction along with the release of the non-cash deferred tax liabilities attributable to the Trans Mountain Asset Group.