Energy Transfer 2015 Annual Report Download - page 211

Table of Contents
The following table sets forth the changes in unrecognized tax benefits:
Years Ended December 31,
2015
2014
2013
Balance at beginning of year $ 440
$ 429
$ 27
Additions attributable to tax positions taken in the current year —
20
—
Additions attributable to tax positions taken in prior years 178
(1)
406
Settlements —
(5)
—
Lapse of statute (8)
(3)
(4)
Balance at end of year $ 610
$ 440
$ 429
As of December 31, 2015, we have $588 million ($550 million after federal income tax benefits) related to tax positions which, if recognized, would
impact our effective tax rate. We believe it is reasonably possible that its unrecognized tax benefits may be reduced by $4 million ($3 million, net of
federal tax) within the next twelve months due to settlement of certain positions.
Our policy is to accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense. During
2015, we recognized interest and penalties of less than $1 million. At December 31, 2015, we have interest and penalties accrued of $5 million, net of
tax.
Sunoco, Inc. has historically included certain government incentive payments as taxable income on its federal and state income tax returns. In
connection with Sunoco, Inc.’s 2004 through 2011 open statute years, Sunoco, Inc. has proposed to the IRS that these government incentive payments
be excluded from federal taxable income. If Sunoco, Inc. is fully successful with its claims, it will receive tax refunds of approximately $519 million.
However, due to the uncertainty surrounding the claims, a reserve of $519 million was established for the full amount of the claims. Due to the timing of
the expected settlement of the claims and the related reserve, the receivable and the reserve for this issue have been netted in the financial statements as
of December 31, 2015.
In December of 2015, The Pennsylvania Commonwealth Court determined in     (“”) that the
Pennsylvania limitation on NOL carryforwards violated the uniformity clause of the Pennsylvania Constitution. Based upon the decision in ,
Sunoco, Inc. is recognizing approximately $46 million ($30 million after federal income tax benefits) in tax benefit based on previously filed tax returns
and certain previously filed protective claims. However, as the  decision is subject to appeal, and because of uncertainty in the breadth of the
application of the decision, we have reserved $9 million ($6 million after federal income tax benefits) against the receivable.
In general, ETP and its subsidiaries are no longer subject to examination by the Internal Revenue Service (“IRS”), and most state jurisdictions, for the
2012 and prior tax years. However, Sunoco, Inc. and its subsidiaries are no longer subject to examination by the IRS for tax years prior to 2007.
Sunoco, Inc. has been examined by the IRS for tax years through 2012. However, statutes remain open for tax years 2007 and forward due to carryback of
net operating losses and/or claims regarding government incentive payments discussed above. All other issues are resolved. Though we believe the tax
years are closed by statute, tax years 2004 through 2006 are impacted by the carryback of net operating losses and under certain circumstances may be
impacted by adjustments for government incentive payments.
Southern Union was under examination by the IRS for the tax years 2004 through 2009. In July 2015, we and the IRS settled all issues related to the IRS
examination of the 2004 through 2009 tax years. As a result of the settlement, we recognized a net tax benefit of $7 million.
ETP and its subsidiaries also have various state and local income tax returns in the process of examination or administrative appeal in various
jurisdictions. We believe the appropriate accruals or unrecognized tax benefits have been recorded for any potential assessment with respect to these
examinations.
11. REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES:
Contingent Matters Potentially Impacting the Partnership from Our Investment in Citrus
     The Florida Department of Transportation, Florida’s Turnpike Enterprise (“FDOT/FTE”) has various
turnpike/State Road 91 widening projects that have impacted or may, over time, impact one or more of
F - 50