DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
The following table presents the fair value of units vested and the unit-based liabilities paid for unit based
awards related to Restricted Phantom Units:
Year Ended December 31,
2011 (a)
2010
(Millions)
Fair value of units vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.5
$0.5
Unit-based liabilities paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.6
$ —
(a) $0.6 million of the liabilities paid in 2011 relate to the 14,215 units and DERs that vested in 2010.
The estimate of RPUs that are expected to vest is based on highly subjective assumptions that could
potentially change over time, including the expected forfeiture rate, which was estimated at 22% for units
granted in 2011, 30% for units granted in 2010 and 21% for units granted in 2009. Therefore, the amount of
unrecognized compensation expense noted above does not necessarily represent the value that will ultimately
be realized in our consolidated statements of operations.
15. Income Taxes
We are structured as a master limited partnership, which is a pass-through entity for federal income tax
purposes. Accordingly, we had no federal deferred tax balance as of December 31, 2011 and no federal income
tax expense for the year ended December 31, 2010. On December 30, 2010, we acquired all of the interests in
Marysville Hydrocarbons Holdings, LLC, an entity that owned a taxable C-Corporation consolidated return
group. We estimated $35.0 million of deferred tax liabilities resulting from built-in tax gains recognized in the
transaction and recorded this in our preliminary purchase price allocation as of December 31, 2010.
On January 4, 2011, we merged two wholly-owned subsidiaries of Marysville Hydrocarbons Holding,
LLC and converted the combined entity’s organizational structure from a corporation to a limited liability
company. This conversion to a limited liability company triggered the deferred tax liabilities resulting from
built-in tax gains to become currently payable. Accordingly, the estimated $35.0 million of deferred tax
liabilities at December 31, 2010 became currently payable on January 4, 2011. During 2011, we made federal
and state tax payments of $29.3 million and $0.3 million, respectively, related to our estimated $35.0 million
tax liability that resulted from our acquisition of Marysville. The remaining $5.4 million estimated tax payable
has been reclassified to goodwill in our final accounting for the Marysville business combination.
The State of Texas imposes a margin tax that is assessed at 1% of taxable margin apportioned to Texas.
During 2010 and 2009, we acquired properties in Michigan. Michigan imposes a business tax of 0.8% on gross
receipts, and 4.95% of Michigan taxable income. The sum of the gross receipts and income tax is subject to a
tax surcharge of 21.99%. Michigan provides tax credits that may reduce our final tax liability.
Income tax expense consists of the following:
Year Ended December 31,
2011
2010 2009
(Millions)
Current:
Federal income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(29.3) $ — $ —
State income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.5)
(0.4)
(0.5)
Deferred:
Federal income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . 29.3 — —
State income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.1) 0.1
(0.1)
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.6) $(0.3) $(0.6)
146