Sunoco LP
For the period ended Dec 31, 2023. Filed Feb 16, 2024.
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FY2023 · Filed Feb 16, 2024
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16. Income Tax Expense
- Income Tax Expense
As a partnership, we are generally not subject to 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:
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Current: | |||
| Federal | $16 | $— | $15 |
| State | 7 | (2) | 5 |
| Total current income tax expense (benefit) | 23 | (2) | 20 |
| Deferred: | |||
| Federal | 9 | 24 | 7 |
| State | 4 | 4 | 3 |
| Total deferred tax expense | 13 | 28 | 10 |
| Income tax expense | $36 | $26 | $30 |
Our effective tax rate differs 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. A reconciliation of income tax expense at the U.S. federal statutory rate to net income tax expense is as follows:
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| (in millions) | |||
| Income tax expense at United States statutory rate | $90 | $105 | $116 |
| Increase (reduction) in income taxes resulting from: | |||
| Partnership earnings not subject to tax | (64) | (74) | (96) |
| State and local tax, including federal expense | 10 | 1 | 7 |
| Other | — | (6) | 3 |
| Income tax expense | $36 | $26 | $30 |
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. Principal components of deferred tax assets and liabilities were as follows:
| December 31, 2023 | December 31, 2022 | |
|---|---|---|
| Deferred tax assets: | ||
| Net operating and other loss carry forwards | $3 | $3 |
| Other | 21 | 22 |
| Total deferred tax assets | 24 | 25 |
| Deferred tax liabilities: | ||
| Property and equipment | 55 | 52 |
| Trademarks and other intangibles | 91 | 89 |
| Investments in unconsolidated affiliates | 44 | 39 |
| Other | — | 1 |
| Total deferred tax liabilities | 190 | 181 |
| Net deferred income tax liabilities | $166 | $156 |
As of December 31, 2023, Sunoco Retail LLC, a corporate subsidiary of Sunoco LP, had a state net operating loss carryforward of $75 million, which we expect to fully utilize. Sunoco Retail LLC has no federal net operating loss carryforward.
As of December 31, 2023, we had $11 million ($8 million after federal income tax benefits) related to tax positions which, if recognized, would impact our effective tax rate. We did not recognize any changes in unrecognized tax benefits in 2023, 2022 or 2021.
We accrue interest and penalties on income tax underpayments (overpayments) as a component of income tax expense. During 2023, we recognized interest and penalties of $1 million. At December 31, 2023, we had interest and penalties accrued of $3 million, net of taxes.
The IRS is auditing a 2018 income tax refund claim filed by a wholly owned subsidiary of Sunoco LP. In general, the Partnership and its subsidiaries are no longer subject to examination by the Internal Revenue Service and most state jurisdictions for 2018 and prior years.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.