Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes

9:INCOME TAXES

Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations, excluding noncontrolling interests:

September 30	2014			2013
CMS Energy, including Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		4.9			5.0
Accelerated flow-through of regulatory tax benefits		(5.3)			-
Other, net		(0.7)			0.7
Effective tax rate		33.9	%		40.7	%
Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		4.9			4.8
Accelerated flow-through of regulatory tax benefits		(4.3)			-
Other, net		(0.7)			(0.2)
Effective tax rate		34.9	%		39.6	%

Prior to 2014, Consumers recognized the income tax benefits associated with the removal costs of plant placed in service before 1993 as payments were made and the tax benefits were flowed through to customers.  In September 2013, the MPSC issued an order authorizing Consumers to flow through to customers the income tax benefits on a straight-line basis over an accelerated period.  This new regulatory treatment, which Consumers implemented in January 2014, will accelerate the return of $209 million of income tax benefits over five years to electric customers and $260 million of income tax benefits over 12 years to gas customers.  For the nine months ended September 30, 2014, this new treatment reduced Consumers’ income tax expense by $30million.

In April 2014, the Internal Revenue Service completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011.  The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense.

Consumers Energy Company [Member]

Income Taxes

9:INCOME TAXES

Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations, excluding noncontrolling interests:

September 30	2014			2013
CMS Energy, including Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		4.9			5.0
Accelerated flow-through of regulatory tax benefits		(5.3)			-
Other, net		(0.7)			0.7
Effective tax rate		33.9	%		40.7	%
Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		4.9			4.8
Accelerated flow-through of regulatory tax benefits		(4.3)			-
Other, net		(0.7)			(0.2)
Effective tax rate		34.9	%		39.6	%

Prior to 2014, Consumers recognized the income tax benefits associated with the removal costs of plant placed in service before 1993 as payments were made and the tax benefits were flowed through to customers.  In September 2013, the MPSC issued an order authorizing Consumers to flow through to customers the income tax benefits on a straight-line basis over an accelerated period.  This new regulatory treatment, which Consumers implemented in January 2014, will accelerate the return of $209 million of income tax benefits over five years to electric customers and $260 million of income tax benefits over 12 years to gas customers.  For the nine months ended September 30, 2014, this new treatment reduced Consumers’ income tax expense by $30million.

In April 2014, the Internal Revenue Service completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011.  The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense.