Prior to the Restructuring on December 16, 2019, the Partnership was not a separate taxable entity for U.S. federal and state income tax purposes; therefore, we did not recognize income tax expense or benefit in those periods. Each partner was subject to income taxes on its share of the Partnership’s earnings. As a result of the Restructuring, the Company holds a 6.32% controlling interest in the Partnership and is subject to federal and state income taxes on its share of the Partnership’s earnings. Although the Company is a Delaware limited partnership, it is subject to corporate income tax, because of our election to be treated as a corporation for U.S. federal and state income tax purposes in connection with the Restructuring.

In connection with the Restructuring, we became a partial owner of the Partnership and recognize income tax expense or benefit on our allocable share of the Partnership’s income or loss subsequent to the Restructuring. For the period from December 16, 2019 through December 31, 2019, we recognized a deferred tax benefit of $0.1 million and we did not have any current income tax expense. As part of the Restructuring, we recognized a deferred tax asset of $49.8 million for the temporary differences related to our investment in the Partnership. The effect of recognizing the deferred tax asset was included in Class A shareholders’ equity balance in the accompanying consolidated statement of changes in partners’ capital due to the Restructuring being characterized as a transaction among or with shareholders.

On March 1, 2019, HIP acquired Hess Water Services (see Note 3, Acquisitions). For the periods prior to March 1, 2019, Hess Water Services was included in the consolidated income tax returns of Hess. The provision for Hess Water Services’ income taxes and income tax assets and liabilities were determined as if it were a standalone taxpayer for all periods presented and is included in our retrospectively recast financial statements.

The difference between the effective income tax rate and the U.S. statutory rate is reconciled below:

	Year Ended December 31,
	2019 ⁽¹⁾				2018 ⁽²⁾				2017 ⁽²⁾
U.S. statutory rate		21.0		%		21.0		%		35.0		%
Non-taxable income from pre-Restructuring period		(21.4	)			(20.6	)			(37.6	)
Change in enacted tax laws		-				-				(1.7	)
Noncontrolling interest in partnership		0.4				-				-
Valuation allowance		-				(0.4	)			4.3
Effective rate		-		%		-		%		-		%
(1) Represents effective income tax rate reconciliation for Hess Midstream LP.
(2) Represents effective income tax rate reconciliation for the pre-Restructuring period, inclusive of stand-alone income tax provision for Hess Water Services.

	December 31,
	2019⁽¹⁾		2018⁽²⁾
(in millions)
Deferred tax liabilities
Investments	$	0.2	$	-
Property, plant and equipment		-		10.7
Total deferred tax liabilities		0.2		10.7
Deferred tax assets
Investments		49.8		-
Net operating loss carryforwards		0.2		16.9
Asset retirement obligations		-		0.2
Total deferred tax assets		50.0		17.1
Valuation allowance		-		(6.4	)
Total deferred tax assets, net of valuation allowance		50.0		10.7
Net deferred tax assets (liabilities)	$	49.8	$	-
(1) Represents components of deferred tax assets and liabilities for Hess Midstream LP.
(2) Represents components of deferred tax assets and liabilities for Hess Water Services.

The 2019 deferred tax position presented in the schedule above primarily represents our deferred tax asset for temporary differences related to our investment in the Partnership. The 2018 deferred tax position presented in the table above represents the results of Hess Water Services as if it were a stand-alone entity for the period. The related activity was included in Hess’s federal and state income tax returns and the related attributes are not available on income tax filings of HIP and its partners. Hess Water Services was in a three-year cumulative loss position at the end of 2018, which constitutes objective negative evidence to which accounting standards require we assign significant weight relative to subjective estimates, such as income projections. As a result, a full valuation allowance was maintained against the net deferred tax assets of Hess Water Services at December 31, 2018.

We have no unrecognized tax benefits or interest and penalties related to tax liabilities recorded in the financial statements. For the years presented, we earned all net income before taxes in the United States. We file income tax returns in the U.S. and various states. We are not subject to examinations by income tax authorities for years prior to 2019.