INCOME TAXES AND CREDITS:

12 Months Ended

Dec. 31, 2011

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):

	2011			2010			2009
Tax at Statutory Rate	$	30,510		$	25,760		$	23,205
Increase (Decrease) Resulting from:
State Income Taxes	5,316			4,340			4,471
Amortization of Investment Tax Credits	(302		)	(310		)	(314		)
ESOP Dividend	(956		)	(874		)	(730		)
Amortization of Flowthrough Depreciation	526			664			664
Other - Net	(813		)	98			(192		)
Net Income Taxes	$	34,281		$	29,678		$	27,104

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

	2011			2010			2009
Current:
Federal	$	(924	)	$	399		$	3,158
State	168			4,739			1,842
Total Current	(756		)	5,138			5,000
Deferred:
Federal	27,329			22,912			17,381
State	8,010			1,938			5,037
Total Deferred	35,339			24,850			22,418
Investment Tax Credits	(302		)	(310		)	(314		)
Net Income Taxes	$	34,281		$	29,678		$	27,104

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):

	2011			2010
Current:
Net Operating Loss Carryforward	$	(6,600	)	$	—
Budget Billing - Customer Accounts	(4,261		)	1,552
Provision for Uncollectibles	(970		)	(1,597		)
Conservation Incentive Program	5,975			5,408
Section 461 Prepayments	822			745
Other	(1,267		)	(1,126		)
Current Deferred Tax (Asset) Liability - Net	$	(6,301	)	$	4,982
Noncurrent:
Book Versus Tax Basis of Property	$	290,882		$	236,804
Deferred Fuel Costs - Net	12,005			2,955
Environmental Remediation	19,869			16,502
Deferred Regulatory Costs	7,396			3,278
Deferred State Tax	(13,219		)	(9,631		)
Investment Tax Credit Basis Gross-Up	(466		)	(622		)
Deferred Pension & Other Post Retirement Benefits	36,048			27,885
Pension & Other Post Retirement Benefits	(24,380		)	(21,223		)
Deferred Revenues	(7,899		)	(15,281		)
Net Operating Loss Carryforward	(35,943		)	—
Other	866			(1,019		)
Noncurrent Deferred Tax Liability – Net	$	285,159		$	239,648

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, 2011 and 2010, income taxes due from SJI were approximately $1.0 million and $7.1 million, respectively, and are included in the balance sheets under the caption, Prepaid Taxes for the respective years.

As of December 31, 2011, SJG has total federal net operating loss carryforwards of $113.7 million and state net operating loss carryforwards of $30.0 million, both of which will expire in 2031. A valuation allowance is established when it is determined that it is more likely than not that a deferred tax asset will not be realized.

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

	2011			2010			2009
Balance at January 1,	$	478		$	576		$	910
Increase as a result of tax position taken in prior years	119			—			42
Decrease due to a lapse in the statue of limitations	(90		)	—			(376		)
Settlements	(86		)	(98		)	—
Balance at December 31,	$	421		$	478		$	576

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 total unrecognized tax benefits as of December 31, 2010 were $0.5 million, not including $0.6 million of accrued interest and penalties. The total unrecognized tax benefits as of December 31, 2009 were $0.6 million, not including $0.5 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 2011, 2010 or 2009. There have been no material changes to the unrecognized tax benefits during 2011, 2010 or 2009 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 2008 forward, and state income tax returns primarily from 2007 forward, are open and subject to examination.