PLAINS ALL AMERICAN PIPELINE LPPAA
PLAINS ALL AMERICAN PIPELINE LP Income Taxes Disclosure
Income Taxes
Income tax expense is estimated using the tax rate in effect or to be in effect during the relevant periods in the jurisdictions in which we operate. Deferred income tax assets and liabilities are recognized for temporary differences between the basis of assets and liabilities for financial reporting and tax purposes and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. Changes in tax legislation are included in the relevant computations in the period in which such changes are effective. We review contingent tax liabilities for estimated exposures on a more likely than not standard related to our current tax positions.
Pursuant to FASB guidance related to accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position and also the past administrative practices and precedents of the taxing authority. As of December 31, 2025 and 2024, we had not recognized any material amounts in connection with uncertainty in income taxes.
U.S. Federal and State Taxes
As an MLP, we are not subject to U.S. federal income taxes; rather the tax effect of our operations is passed through to our unitholders. Although we are subject to state income taxes in some states, the impact to the years ended December 31, 2025, 2024, and 2023 was immaterial.
Canadian Federal and Provincial Taxes
All of our Canadian operations are conducted by entities that are treated as corporations for Canadian tax purposes (flow through for U.S. income tax purposes) and thus are subject to Canadian federal and provincial taxes. Additionally, payments of interest and dividends from our Canadian entities to other Plains entities are subject to Canadian withholding tax that is treated as income tax expense.
Tax Components
Pre-tax book income by geography is as follows (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | 1,356 | $ | 838 | $ | 1,139 | |||||||||||
Canada | 45 | 131 | 232 | ||||||||||||||
Total pre-tax book income | $ | 1,401 | $ | 969 | $ | 1,371 | |||||||||||
Components of income tax expense are as follows (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current income tax expense/(benefit): | |||||||||||||||||
| State income tax | $ | 2 | $ | 2 | $ | 2 | |||||||||||
Canadian federal and provincial income and withholding taxes | (1) | 80 | 68 | ||||||||||||||
| Total current income tax expense | $ | 1 | $ | 82 | $ | 70 | |||||||||||
| Deferred income tax expense/(benefit): | |||||||||||||||||
Canadian federal and provincial income and withholding taxes | $ | 14 | $ | 5 | $ | (9) | |||||||||||
| Total deferred income tax expense/(benefit) | $ | 14 | $ | 5 | $ | (9) | |||||||||||
Total income tax expense | $ | 15 | $ | 87 | $ | 61 | |||||||||||
The difference between income tax expense based on the statutory federal income tax rate and our effective income tax expense is summarized as follows (in millions, except percentages):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
U.S. federal statutory tax rate | $ | 294 | 21.00 | % | $ | 204 | 21.00 | % | $ | 288 | 21.00 | % | |||||||||||||||||||||||
State and local income taxes (1) | 2 | 0.14 | % | 2 | 0.21 | % | 2 | 0.15 | % | ||||||||||||||||||||||||||
Foreign tax effects: | |||||||||||||||||||||||||||||||||||
Canada | |||||||||||||||||||||||||||||||||||
Foreign rate differential | (3) | (0.19) | % | (8) | (0.81) | % | (14) | (1.01) | % | ||||||||||||||||||||||||||
Provincial taxes | 5 | 0.35 | % | 13 | 1.35 | % | 20 | 1.51 | % | ||||||||||||||||||||||||||
Foreign withholding taxes | 3 | 0.21 | % | 52 | 5.39 | % | — | — | % | ||||||||||||||||||||||||||
Other | (2) | (0.13) | % | — | — | % | 4 | 0.29 | % | ||||||||||||||||||||||||||
Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
Nontaxable income - U.S. partnership income | (284) | (20.33) | % | (176) | (18.17) | % | (239) | (17.45) | % | ||||||||||||||||||||||||||
Effective tax rate | $ | 15 | 1.06 | % | $ | 87 | 8.95 | % | $ | 61 | 4.48 | % | |||||||||||||||||||||||
(1)The state and local income tax category of the rate reconciliation is primarily comprised of income taxes in Texas, which represents more than 50 percent of the state and local tax effect.
Supplemental Disclosures
Cash taxes paid were as follows (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
State income tax: | |||||||||||||||||
Texas | $ | 1 | $ | 2 | 2 | ||||||||||||
| Total state income tax paid | 1 | 2 | 2 | ||||||||||||||
Canadian federal and provincial income and withholding taxes | 97 | 267 | 67 | ||||||||||||||
Total cash tax paid | $ | 98 | $ | 269 | $ | 69 | |||||||||||
Deferred tax assets and liabilities are aggregated by the applicable tax paying entity and jurisdiction and result from the following (in millions):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Derivative instruments | $ | — | $ | 6 | |||||||
| Lease liabilities | 10 | 8 | |||||||||
| Other | 7 | 8 | |||||||||
| Total deferred tax assets | 17 | 22 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment in excess of tax values | (204) | (185) | |||||||||
| Lease assets | (9) | (10) | |||||||||
| Other | (1) | (1) | |||||||||
| Total deferred tax liabilities | (214) | (196) | |||||||||
| Net deferred tax liabilities | $ | (197) | $ | (174) | |||||||
| Balance sheet classification of deferred tax assets/(liabilities): | |||||||||||
| Other long-term liabilities and deferred credits | $ | (197) | $ | (174) | |||||||
| $ | (197) | $ | (174) | ||||||||
Generally, tax returns for our Canadian entities are open to audit from 2018 through 2025. Our U.S. and state tax years are generally open to examination from 2022 to 2025.
As of December 31, 2025, in reference to tax years 2012 to 2019, we had received notices of reassessment (“notices”) from the Canada Revenue Agency and the Alberta Tax and Revenue Administration (the “Canadian Tax Authorities”) related primarily to transfer pricing associated with cross-border intercompany financing transactions. The notices include assessments, including penalties and interest, associated with these transfer pricing matters totaling approximately $189 million (based on the exchange rate as of December 31, 2025). Payment of a portion of the assessment is required in order to file a notice of objection to dispute the reassessment. Accordingly, we have remitted approximately $86 million (based on the exchange rate as of December 31, 2025) related to the assessments, which is included in “Other long-term assets, net,” on our Consolidated Balance Sheets. We disagree with these notices and have contested the reassessments. We intend to vigorously defend our position, and we plan to pursue all remedies available to us to successfully resolve these matters, including administrative remedies with the Canadian Tax Authorities, and judicial remedies, if necessary. As of December 31, 2025, we believe that our tax position associated with these matters is “more likely than not” to be sustained and have not recognized any amounts for uncertainty in income taxes related to these notices.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 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.