INCOME TAXES AND CREDITS

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES AND CREDITS

INCOME TAXES AND CREDITS:

Total income taxes applicable to operations differ from the tax that would have resulted by applying the statutory Federal income tax rate to pre-tax income for the following reasons (in thousands):

	2013			2012			2011
Tax at Statutory Rate	$	33,974		$	32,183		$	30,510
Increase (Decrease) Resulting from:
State Income Taxes	4,833			5,302			5,316
Amortization of Investment Tax Credits	(258		)	(287		)	(302		)
ESOP Dividend	(1,058		)	(1,027		)	(956		)
AFUDC	(916		)	(1,048		)	(729		)
Amortization of Flowthrough Depreciation	—			—			526
Other - Net	(1,742		)	(1,412		)	(84		)
Net Income Taxes	$	34,833		$	33,711		$	34,281

The provision for Income Taxes is comprised of the following (in thousands):

	2013			2012			2011
Current:
Federal	$	(53	)	$	(4,635	)	$	(924	)
State	2,946			(7		)	168
Total Current	2,893			(4,642		)	(756		)
Deferred:
Federal	27,707			30,477			27,329
State	4,491			8,163			8,010
Total Deferred	32,198			38,640			35,339
Investment Tax Credits	(258		)	(287		)	(302		)
Net Income Taxes	$	34,833		$	33,711		$	34,281

Investment Tax Credits are deferred and amortized at the annual rate of 3%, which approximates the life of related assets.

The net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes resulted in the following net deferred tax liabilities at December 31 (in thousands):

	2013			2012
Current:
Net Operating Loss Carryforward	$	(27,600	)	$	(2,586	)
Budget Billing - Customer Accounts	1,152			1,033
Provision for Uncollectibles	(1,726		)	(1,409		)
Conservation Incentive Program	4,631			13,942
Section 461 Prepayments	1,156			930
Other	(922		)	(1,478		)
Current Deferred Tax (Asset) Liability - Net	$	(23,309	)	$	10,432
Noncurrent:
Book Versus Tax Basis of Property	$	371,684		$	323,470
Deferred Fuel Costs - Net	1,330			3,325
Environmental Remediation	14,392			17,643
Deferred Regulatory Costs	13,665			15,374
Deferred State Tax	(15,471		)	(15,106		)
Investment Tax Credit Basis Gross-Up	(185		)	(318		)
Deferred Pension & Other Post Retirement Benefits	24,218			39,174
Pension & Other Post Retirement Benefits	(14,152		)	(28,846		)
Deferred Revenues	(9,266		)	(8,922		)
Net Operating Loss Carryforward	(8,764		)	(35,901		)
Other	3,524			464
Noncurrent Deferred Tax Liability – Net	$	380,975		$	310,357

SJG is included in the consolidated federal income tax return filed by SJI. The actual taxes, including credits, are allocated by SJI to its subsidiaries, generally on a separate return basis except for net operating loss and credit carryforwards. As of December 31, 2013 there were no income taxes due from SJI. As of December 31, 2012 income taxes due from SJI were approximately $4.6 million and are included in the balance sheets under the caption, Prepaid Taxes.

As of December 31, 2013, SJG has total federal net operating loss carryforwards of $103.7 million; $99.4 million of the federal NOL will expire in 2031 and $4.3 million will expire in 2032. A valuation allowance is recorded when it is more likely than not that any of our deferred income tax assets will not be realized. We believe that we will generate sufficient future taxable income to realize the income tax benefits related to our deferred tax assets.

A reconciliation of unrecognized tax benefits is as follows (in thousands):

	2013		2012		2011
Balance at January 1,	$	503	$	421	$	478
Increase as a result of tax position taken in prior years	44		82		119
Decrease due to a lapse in the statue of limitations	—		—		(90		)
Settlements	—		—		(86		)
Balance at December 31,	$	547	$	503	$	421

The total unrecognized tax benefits as of December 31, 2013 were $0.5 million, not including $0.6 million of accrued interest and penalties.  The total unrecognized tax benefits as of December 31, 2012 were $0.5 million not including $0.6 million of accrued interest and penalties. The total unrecognized tax benefits as of December 31, 2011 were $0.4 million, not including $0.6 million of accrued interest and penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is not significant.  Our policy is to record interest and penalties related to unrecognized tax benefits as interest expense and other expense respectively. These amounts were not significant in 2013, 2012 or 2011. There have been no material changes to the unrecognized tax benefits during 2013, 2012 or 2011 and we do not anticipate any significant changes in the total unrecognized tax benefits within the next 12 months.

The unrecognized tax benefits are primarily related to an uncertainty of state income taxes.  Federal income tax returns from 2009 forward and state income tax returns from 2012 forward are open and subject to examination.