13. INCOME TAXES

We are not a taxable entity for United States federal income tax purposes or for the majority of states that impose an income tax. Taxes on our net income generally are borne by our unitholders through the allocation of taxable income. Our income tax expense results from the enactment of franchise tax laws by the State of Texas that apply to entities organized as partnerships, and which is based upon many but not all items included in net income.

We compute our income tax expense by applying a Texas state franchise tax rate to modified gross margin. Our Texas state franchise tax rate was 0.4% for the three months ended March 31, 2016 and 2015.

At March 31, 2016 and December 31, 2015, we included a current income tax payable of $2.7 million and $1.1 million, respectively, in “Property and other taxes payable” on our consolidated statements of financial position. In addition, at March 31, 2016 and December 31, 2015, we included a deferred income tax payable of $21.5 million and $20.9 million, respectively, in “Other long-term liabilities,” on our consolidated statements of financial position to reflect the tax associated with the difference between the net basis in assets and liabilities for financial and state tax reporting.