Texas Pacific Land Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2019

The income tax provision charged to operations for the years ended December 31, 2019, 2018 and 2017 was as follows (in thousands):


	Years Ended December 31,
	2019		2018		2017
Current:
U.S. Federal	$	55,562	$	35,593	$	46,013
State and local	1,930		1,607		851
	57,492		37,200		46,864
Deferred expense	26,035		14,814		966
	$	83,527	$	52,014	$	47,830

The Trust is taxed as if it were a corporation. Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21% for the years ended December 31, 2019 and 2018 and 35% for the year ended 2017 to income before Federal income taxes as a result of the following (in thousands):


	Years Ended December 31,
	2019		2018		2017
Computed tax expense at the statutory rate	$	84,473	$	54,968	$	50,771
Reduction in income taxes resulting from:
Statutory depletion	(5,163)		(4,185)		(3,378)
State taxes	1,657		1,243		530
Executive compensation	1,302		—		—
Prior year tax adjustments	755		—		—
Effect of change in statutory tax rate⁽¹⁾	—		—		(103)
Other, net	503		(12)		10
	$	83,527	$	52,014	$	47,830

(1)The effect of the change in statutory income tax rate from 35% to 21% effective January 1, 2018 which was anticipated as of December 31, 2017.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2019 and 2018 are as follows (in thousands):


	December 31, 2019		December 31, 2018
Unearned revenue	$	3,741	$	2,878

Total deferred tax assets	3,741		2,878

Property, plant and equipment	17,030		10,723
§1031 tax exchanges	26,638		6,791
Deferred credits	748		—
Real estate acquired through foreclosure	142		142
Other	10		125
Total deferred tax liability	44,568		17,781
Net deferred tax liability	$	(40,827)	$	(14,903)

The Trust files a U. S. Federal income tax return. With few exceptions, the Trust is no longer subject to U. S. Federal income tax examination by tax authorities for years before 2016.