Energy Transfer 2012 Annual Report Download - page 185

F - 40
9. INCOME TAXES:
As a partnership, we are not subject to U.S. federal income tax and most state income taxes. However, the partnership conducts
certain activities through corporate subsidiaries which are subject to federal and state income taxes. The components of the
federal and state income tax expense (benefit) are summarized as follows:
Years Ended December 31,
2012 2011 2010
Current expense (benefit):
Federal $(3) $ (1) $ 1
State 4 16 9
Total 1 15 10
Deferred expense:
Federal 45 4 6
State 17 — —
Total 62 4 6
Total income tax expense from continuing operations $ 63 $ 19 $ 16
Historically, our effective rate differed from the statutory rate primarily due to Partnership earnings that are not subject to
U.S. federal and most state income taxes at the Partnership level. The completion of the Southern Union, Sunoco and Holdco
transactions (see Note 3) significantly increased the activities conducted through corporate subsidiaries. A reconciliation of
income tax expense (benefit) at the U.S. statutory rate to the income tax expense (benefit) attributable to continuing operations
for the year ended December 31, 2012 is as follows:
Holdco(1)
Other
Corporate
Subsidiaries(2) Partnership(3) Consolidated
Income tax expense (benefit) at U.S. statutory rate of 35
percent $ (1) $ 2 $ — $ 1
Increase (reduction) in income taxes resulting from:
Nondeductible executive compensation 28 — — 28
State income taxes (net of federal income tax effects) 9 — 7 16
Other 17 1 — 18
Income tax income from continuing operations $ 53 $ 3 $ 7 $ 63
(1) Holdco, which was formed via the Sunoco Merger and the Holdco transactions (see Note 3), includes Sunoco and Southern
Union and their subsidiaries.
(2) Includes Oasis Pipeline Company, Inland Corporation, Mid-Valley Pipeline Company and West Texas Gulf Pipeline
Company. The latter three entities were acquired in the Sunoco transaction.
(3) Includes ETP and its subsidiaries that are classified as pass-through entities for federal income tax purposes.
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