Taxes on Income

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

Taxes on Income

10. Taxes on Income

The following table provides a summary of the current and deferred components of income tax expense from continuing operations for the periods presented.

		Years Ended December 31,
		2011		2010		2009
					(In thousands)
Current:
	Federal	$	4,637	$	1,963	$	(44,060)
	State		(4,395)		(2,352)		(5,250)
			242		(389)		(49,310)
Deferred:
	Federal		95,972		93,330		108,956
	State		7,566		14,088		12,254
			103,538		107,418		121,210
Total federal and state income tax
	expense from continuing operations	$	103,780	$	107,029	$	71,900
Effective tax rate			29%		31%		29%

Deferred income taxes result from temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The table below summarizes the principal components of the Company's deferred tax assets (liabilities) at the dates indicated.

			December 31,
			2011		2010
				(In thousands)
Deferred income tax assets:
	Alternative minimum tax credit		$	38,391	$	36,526
	Other postretirement benefits			21,837		20,206
	Pension benefits			32,495		23,491
	Derivative financial instruments (interest rates)			32,057		13,571
	Net operating loss			24,750		-
	Other			34,566		39,245
		Total deferred income tax assets		184,096		133,039
Deferred income tax liabilities:
	Property, plant and equipment			(1,139,135)		(1,032,473)
	Unconsolidated investments (Citrus)			(29,059)		(19,177)
	Goodwill			(16,718)		(16,952)
	Environmental reserve			(11,641)		(9,374)
	Other			(19,268)		(32,296)
		Total deferred income tax liabilities		(1,215,821)		(1,110,272)
Net deferred income tax liability				(1,031,725)		(977,233)
	Less current income tax assets (liabilities)			13,152		36,630
Accumulated deferred income taxes			$	(1,044,877)	$	(1,013,863)

The Company has federal net operating loss (NOL) carryforwards of $65 million, of which $15 million will expire in 2030 and $50 million in 2031. The Company has state NOL carryforwards of $52 million, expiring between 2013 and 2031.

The differences between the Company's EITR and the U.S. federal income tax statutory rate for the periods presented are as follows:

			Years Ended December 31,
			2011		2010		2009
				(In thousands)
Computed statutory income tax expense at 35%			$	125,721	$	122,387	$	88,018
Changes in income taxes resulting from:
	Earnings from unconsolidated investments related to
		anticipated receipt of dividends		(27,317)		(26,973)		(20,300)
	State income taxes, net of federal income tax benefit			2,296		7,878		4,553
	Other			3,080		3,737		(371)
Actual income tax expense from continuing operations			$	103,780	$	107,029	$	71,900

Due to the anticipated increase in dividends from Citrus as a result of the Phase VIII Expansion, the Company expects the entire deferred income tax liability related to its investment in Citrus would be realized at the Company's statutory income tax rate less the dividends received deduction.

A reconciliation of the changes in unrecognized tax benefits for the periods presented is as follows:

		Years ended December 31,
		2011		2010		2009
			(In thousands)
Beginning of the year		$	15,837	$	12,864	$	7,210
Additions:
	Tax positions taken in prior years		188		-		2,195
	Tax positions taken in current year		3,354		3,146		3,459
Reductions:
	Settlements		(791)		(173)		-
End of year		$	18,588	$	15,837	$	12,864

As of December 31, 2011, the Company has unrecognized tax benefits for capitalization policies and state filing positions of $2.3million and $16.3million, respectively. However, only the $16.3million ($10.6million, net of federal tax) unrecognized tax benefits for certain state filing positions would impact the Company's EITR if recognized. The Company believes it is reasonably possible that its unrecognized tax benefits may be reduced by $3.3million ($2.1 million, net of federal tax) within the next twelve months due to settlement of certain state filing positions.

The Company's policy is to classify and accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense in its Consolidated Statement of Operations, which is consistent with the recognition of these items in prior reporting periods.

During 2011, the Company recognized interest and penalties of $726,000($709,000, net of tax). At December 31, 2011, the Company has interest and penalties accrued of $2.1million ($1.8million, net of tax).

The Company is no longer subject to U.S. federal, state or local examinations for the tax period ended December 31, 2004 and prior years, except June 30, 2004, to the extent of $1.3 million of refund claims.