Energy Transfer LPET
Energy Transfer LP Income Taxes Disclosure
INCOME TAXES:
As a partnership, we are not subject to United States 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 Partnership’s income (loss) before income tax expense by geographic area is shown in the table below:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 5,869 | $ | 7,101 | $ | 5,602 | |||||||||||
| Foreign | 189 | 5 | (5) | ||||||||||||||
| Total | $ | 6,058 | $ | 7,106 | $ | 5,597 | |||||||||||
The components of the federal and state income tax expense (benefit) of our taxable subsidiaries are summarized as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current expense: | |||||||||||||||||
| Federal | $ | 164 | $ | 198 | $ | 56 | |||||||||||
| State | 1 | 66 | 44 | ||||||||||||||
| Foreign | 7 | 1 | — | ||||||||||||||
| Total | 172 | 265 | 100 | ||||||||||||||
| Deferred expense (benefit): | |||||||||||||||||
| Federal | 177 | 175 | 227 | ||||||||||||||
| State | (23) | 101 | (24) | ||||||||||||||
| Foreign | 24 | — | — | ||||||||||||||
| Total | 178 | 276 | 203 | ||||||||||||||
| Total income tax expense | $ | 350 | $ | 541 | $ | 303 | |||||||||||
Historically, our effective tax rate has differed from the statutory rate primarily due to partnership earnings that are not subject to United States federal and most state income taxes at the partnership level. A reconciliation of income tax expense
at the United States statutory rate to the Partnership’s income tax benefit for the years ended December 31, 2025, 2024 and 2023 is as follows:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
Income tax expense at United States statutory rate | $ | 1,272 | 21.00% | $ | 1,492 | 21.00% | $ | 1,175 | 21.00% | ||||||||||||||||||||||||||
Increase (reduction) in income taxes resulting from: | |||||||||||||||||||||||||||||||||||
| Non-taxable Partnership earnings | (944) | (15.59)% | (1,084) | (15.25)% | (884) | (15.79)% | |||||||||||||||||||||||||||||
State and local income tax, net of federal income tax effect(1) | 4 | 0.07% | 113 | 1.59% | 37 | 0.65% | |||||||||||||||||||||||||||||
| Foreign tax effects | (4) | (0.06)% | — | — | — | — | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | 6 | 0.10% | — | — | — | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | 2 | 0.03% | — | — | (3) | (0.05)% | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (5) | (0.08)% | 21 | 0.29% | (14) | (0.24)% | |||||||||||||||||||||||||||||
| Other adjustments | 19 | 0.32% | (1) | (0.02)% | (8) | (0.16)% | |||||||||||||||||||||||||||||
| Income tax expense | $ | 350 | 5.79% | $ | 541 | 7.61% | $ | 303 | 5.41% | ||||||||||||||||||||||||||
(1)State taxes that made up the majority (greater than 50 percent) of the tax effect in this category were Texas in 2025, Pennsylvania, Texas, New Jersey and New York in 2024 and Texas in 2023.
The One Big Beautiful Bill Act (“OBBBA”), enacted in July 2025, is expected to impact the Partnership primarily through the ability to take higher tax depreciation deductions via 100% expensing on eligible property and higher interest expense deductions via more favorable interest expense limitation calculations. We will continue to monitor regulatory guidance and interpretations, which could have a material impact on our financials condition and results of operations.
Cash paid for income taxes were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cash paid for income taxes, net of refunds (excluding federal tax credits purchased from non-governmental third parties): | |||||||||||||||||
| Federal: | $ | — | $ | 150 | $ | 64 | |||||||||||
| State: | |||||||||||||||||
| Texas | 26 | 14 | 16 | ||||||||||||||
| Pennsylvania | * | * | 6 | ||||||||||||||
| New Jersey | * | 13 | 6 | ||||||||||||||
| Other | 12 | 29 | 11 | ||||||||||||||
| Foreign: | |||||||||||||||||
| Canada | 62 | — | — | ||||||||||||||
| Other | 3 | — | — | ||||||||||||||
| Total | $ | 103 | $ | 206 | $ | 103 | |||||||||||
| Cash paid for federal tax credits purchased from non-governmental third parties | $ | 97 | $ | 47 | $ | — | |||||||||||
*Amount of income taxes paid during the year did not meet the 5% disaggregation threshold.
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The following table summarizes the principal components of the deferred tax assets (liabilities) as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating losses and other carryforwards | $ | 443 | $ | 197 | |||||||
| Other | 75 | 42 | |||||||||
| Total deferred income tax assets | 518 | 239 | |||||||||
| Valuation allowance | (64) | — | |||||||||
| Net deferred income tax assets | 454 | 239 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Property, plant and equipment | (1,083) | (224) | |||||||||
| Investments in affiliates | (4,200) | (4,098) | |||||||||
| Trademarks | (240) | (82) | |||||||||
| Other | (61) | (18) | |||||||||
| Total deferred income tax liabilities | (5,584) | (4,422) | |||||||||
| Net deferred income taxes | $ | (5,130) | $ | (4,183) | |||||||
The completion of the Parkland transaction significantly increased the deferred tax assets (liabilities). The table below provides a rollforward of the net deferred income tax liability:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net deferred income tax liability, beginning of year | $ | (4,183) | $ | (3,931) | |||||||
| Acquired in Parkland acquisition | (755) | — | |||||||||
| Acquired in NuStar acquisition | — | (3) | |||||||||
| Tax accrual | (192) | (249) | |||||||||
| Net deferred income tax liability | $ | (5,130) | $ | (4,183) | |||||||
As of December 31, 2025, ETP Holdco had federal net operating loss (NOL) carryforwards of $325 million, which are limited under IRC §382 and may be carried forward indefinitely. Although these federal NOLs are expected to be fully utilized, the amount utilized in a particular year may be limited. Sunoco Retail, LLC had federal NOL carryforwards of $287 million, that may be carried forward indefinitely. Of this amount, $206 million is subject to limitations under IRC §382 (ownership-change limitation) and $35 million is limited under Separate Return Limitation Year (SRLY) rules. Although these federal NOLs are expected to be fully utilized, the amount utilized in a particular year may be limited. SunocoCorp, LLC had federal NOL carryforwards of $9 million that may be carried forward indefinitely. Sunoco Retail, LLC's foreign subsidiaries had NOL carryforwards of $425 million, of which, $279 million expire between 2026 and 2045. Evergreen Capital Holdings, LLC had federal NOL carryforwards of $30 million that may be carried forward indefinitely. Our corporate subsidiaries have state NOL carryforward benefits of $69 million, net of federal tax, with some expiring between 2026 and 2044 and others carried forward indefinitely. Our corporate subsidiaries have cumulative excess business interest expense carryforwards of $181 million available for indefinite carryforward, of which, $159 million is limited under IRC §382. Although the excess business interest expense carryforwards are expected to be fully utilized, the amount utilized in a particular year may be limited. For the year ended December 31, 2025, the net change in the total valuation allowances was an increase of $64 million, and for the year ended December 31, 2024, there was no net change. Valuation allowances totaling $52 million and $12 million are attributable to foreign and federal NOLs, respectively.
The following table sets forth the changes in unrecognized tax benefits:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of year | $ | 74 | $ | 40 | $ | 52 | |||||||||||
| Additions attributable to tax positions taken in prior years | — | 34 | — | ||||||||||||||
| Reduction attributable to tax positions taken in prior years | (8) | — | (9) | ||||||||||||||
| Settlements | — | — | (3) | ||||||||||||||
| Balance at end of year | $ | 66 | $ | 74 | $ | 40 | |||||||||||
As of December 31, 2025, we had $66 million ($59 million after federal income tax benefits) related to tax positions which, if recognized, would impact our effective tax rate.
Our policy is to accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense. During 2025, we recognized an interest and penalty benefit of $2 million. At December 31, 2025, we have interest and penalties accrued of $7 million, net of tax.
Pennsylvania Case
In November 2015, the Pennsylvania Commonwealth Court determined in Nextel Communications v. Commonwealth (“Nextel”) that the Pennsylvania limitation on NOL carryforward deductions violated the uniformity clause of the Pennsylvania Constitution and struck the NOL limitation in its entirety. In October 2017, the Pennsylvania Supreme Court affirmed the decision with respect to the uniformity clause violation; however, the Court reversed with respect to the remedy and instead severed the flat-dollar limitation, leaving the percentage-based limitation intact. ETC Sunoco previously recognized approximately $67 million ($53 million after federal income tax benefits) in tax benefit based on previously filed tax returns and certain previously filed protective claims held pending the Nextel matter. Based upon the Pennsylvania Supreme Court’s October 2017 decision, and because of uncertainty in the breadth of the application of the decision, ETC Sunoco reserved $34 million ($27 million after federal income tax benefits) against the receivable. On December 22, 2021, the Pennsylvania Supreme Court found in General Motors Corporation v. Commonwealth (“GM”) that the taxpayer was entitled to meaningful backwards looking relief under the Due Process Clause, meaning the Commonwealth must equalize the taxpayer’s position with taxpayers who were not affected by the NOL cap in place for the year at issue. The Court therefore held the taxpayer was entitled to a refund by calculating its tax for that year with an uncapped NOL deduction. We believed the Pennsylvania Supreme Court’s ruling in GM would more likely than not be upheld if challenged by the Commonwealth, and we reversed the reserve thereby recognizing the entire tax benefit of $34 million ($27 million after federal income tax benefit).
On November 20, 2024, the Pennsylvania Supreme Court reversed its earlier holding in GM and determined taxpayers are not entitled to refunds for excess taxes paid in earlier years. Following the reversal of the GM decision, we reinstated the reserve. Certain Pennsylvania taxpayers filed suit against the Commonwealth following the reversal of the GM decision on the basis that the court’s ruling should not apply to taxpayers who did not claim refunds in prior years but who, instead, took uncapped NOL positions on their tax returns and were subsequently assessed by the Department of Revenue. The lead case in this challenge remains pending before the Pennsylvania Commonwealth Court.
IRS Audits
The IRS audit of the Partnership’s 2020 U.S. Federal income tax return closed with no changes proposed. In general, Energy Transfer and its subsidiaries are no longer subject to examination by the IRS, and most state jurisdictions, for the 2020 and prior tax years. Energy Transfer and its other 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.
USAC is currently under examination by the IRS for years 2019 and 2020. The IRS has issued preliminary partnership examination changes, resulting in imputed underpayment computations of approximately $30 million, including interest, for the 2019 and 2020 tax years. Under the Bipartisan Budget Act of 2015, there are several procedural steps to complete before a final imputed underpayment, if any, is determined. Based on discussions with the IRS, USAC accrued $2.9 million, which USAC believes is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the years 2019 and 2020. However, USAC’s final imputed underpayment, if any, has not been determined. Once determined, USAC’s general partner may either elect to pay the imputed underpayment, if any,
(including any applicable penalties and interest) directly to the IRS or, if eligible, issue a revised information statement to each unitholder, or former unitholder as applicable, of USAC with respect to an audited and adjusted return.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.