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How Tax Cut Impacted Kinder Morgan’s 4Q17 Results

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Dec. 4 2020, Updated 10:53 a.m. ET

Impact on KMI’s earnings

The reduction of the corporate income tax rate from 35% to 21% impacted Kinder Morgan’s (KMI) results in 4Q17. In this part, we’ll discuss how the tax cut impacted KMI’s earnings for the quarter as well as its impact on the company’s future earnings. In 4Q17, KMI recorded a $1.4 billion non-cash charge due to the tax cut. This was because the company had to adjust some of its deferred tax assets at the new reduced rate.

Kinder Morgan reported a net loss of ~$1.0 billion for 4Q17 compared to a net income of $170 million in 4Q16. While the company reported a per-share loss of $0.47 for 4Q17, its adjusted earnings per share for the quarter was $0.21.

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Tax cut was positive for KMI

The tax cut is expected to be positive for Kinder Morgan. Though KMI had to account for the non-cash charge in 4Q17, the reduced rate means that the company’s tax payments will be reduced in the future. Additionally, under the new rules, most of KMI’s business units will be able to deduct 100% of their capital expenditures up to 2022.

President and CEO Steve Kean summarized the impact of new tax rules as follows: “The net impact results in postponing the date when KMI becomes a federal cash taxpayer by approximately one year, to beyond 2024.”

In the next article, we’ll discuss what drove Kinder Morgan’s operational performance in 4Q17.

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