Energy Transfer 2010 Annual Report Download - page 147

Contributions in Aid of Construction Costs
On certain of our capital projects, third parties are obligated to reimburse us for all or a portion of project
expenditures. The majority of such arrangements are associated with pipeline construction and production
well tie-ins. Contributions in aid of construction costs (“CIAC”) are netted against our project costs as they
are received, and any CIAC which exceeds our total project costs, is recognized as other income in the
period in which it is realized.
Shipping and Handling Costs
Shipping and handling costs related to fuel sold are included in cost of products sold. Shipping and handling
costs related to fuel consumed for compression and treating are included in operating expenses and are as
follows:
Years Ended December 31,
2010 2009 2008
Shipping and handling costs – recorded in operating expenses $ 43,321 $ 55,872 $ 112,035
We do not separately charge propane shipping and handling costs to customers.
Costs and Expenses
Costs of products sold include actual cost of fuel sold, adjusted for the effects of our hedging and other
commodity derivative activities, storage fees and inbound freight on propane, and the cost of appliances,
parts and fittings. Operating expenses include all costs incurred to provide products to customers, including
compensation for operations personnel, insurance costs, vehicle maintenance, advertising costs, shipping
and handling costs related to propane, purchasing costs and plant operations. Selling, general and
administrative expenses include all partnership related expenses and compensation for executive,
partnership, and administrative personnel.
We record the collection of taxes to be remitted to government authorities on a net basis.
Income Taxes
Energy Transfer Partners, L.P. is a limited partnership. As a result, our earnings or losses, to the extent not
included in a taxable subsidiary, for federal and state income tax purposes are included in the tax returns of
the individual partners. Net earnings for financial statement purposes may differ significantly from taxable
income reportable to Unitholders as a result of differences between the tax basis and financial reporting
basis of assets and liabilities, in addition to the allocation requirements related to taxable income under our
Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”).
As a limited partnership, we are generally not subject to income tax. We are, however, subject to a statutory
requirement that our non-qualifying income (including income such as derivative gains from trading
activities, service income, tank rentals and others) cannot exceed 10% of our total gross income, determined
on a calendar year basis under the applicable income tax provisions. If the amount of our non-qualifying
income exceeds this statutory limit, we would be taxed as a corporation. Accordingly, certain activities that
generate non-qualifying income are conducted through taxable corporate subsidiaries (“C corporations”).
These C corporations are subject to federal and state income tax and pay the income taxes related to the
results of their operations. For the years ended December 31, 2010, 2009 and 2008, our non-qualifying
income did not exceed the statutory limit.
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