Income Taxes

12 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

(6) Income Taxes

Income tax expense for the years ended September 30 is as follows:
	2011	2010	2009
Current	($54,139)	$1,114,034	($1,555,010)
Deferred	284,173	(140,722)	1,769,684
Total	$230,034	$973,312	$214,674
Actual income tax expense differs from the expected tax expense (computed by applying the federal
corporate tax rate of 35% and state tax rate of 7.1% to income before income tax expense for 2009, and
applying the federal tax rate of 34% and state tax rate of 7.1% for 2010 and 2011) as follows:
	2011	2010	2009
Expected federal tax expense	$536,813	$889,078	$310,436
State tax expense (net of federal)	112,099	185,660	62,974
Net operating loss carryforwards	(468,755)	(2,783)	(189,228)
Other, net	49,877	(98,643)	30,492
Actual tax expense	$230,034	$973,312	$214,674

Our effective tax rate for the period ending September 30, 2011 was 14.6% instead of the expected rate of 41.1% (34% federal provision and 7.1% New York State provision) due mainly to bonus depreciation on the Compressor Station, an asset not on the Company’s Balance Sheet due to regulatory accounting (see Note (q) 311 Transportation Agreement/Compressor Station for more information). Our effective tax rate for the period ending September 30, 2010 was 37.2% instead of the expected rate of 41.1% (34% federal provision and 7.1% New York State provision) due to bonus depreciation and the adjustment back to a 34% federal provision for the prior fiscal year. Our effective tax rate for the period ending September 30, 2009 was 24.2% instead of the expected 42.1% (we were recognizing a 35% federal provision and 7.1% New York State provision) primarily due to bonus depreciation allowed this year. Taxes paid have also been affected by the amount of net operating loss (NOL) carryforward on both federal and state returns and have positively affected our effective tax rates.

The tax effects of temporary differences that result in deferred income tax assets and liabilities at September 30 are as follows:

	2011	2010	2009
Deferred income tax assets:
Unbilled revenue	$-	$42,187	$44,892
Deferred compensation reserve	810,617	900,339	989,804
Post-retirement benefit obligations	317,329	339,462	637,193
Comprehensive income	2,367,781	2,473,850	2,562,651
Estimated tax payments	1,332,039	26,888	-
Inventories	-	-	56,705
Prior period tax reconciliations (1)(2)(3)	687,570	468,078	1,183,158
Other	855,783	603,756	786,980
Total deferred income tax assets	6,371,119	4,854,560	6,261,383
Deferred income tax liabilities:
Property, plant and equipment, principally due to
differences in depreciation	2,591,119	2,561,750	2,585,440
Pension benefit obligations	1,290,001	1,057,256	1,244,973
Unbilled revenue	39,893	-	-
Inventories	60,795	64,277	-
Deferred rate expense and allocations	583,994	645,196	615,506
Deficiency of gas adjustment clause revenues billed	236,923	373,905	357,302
Other	407,875	542,465	376,358
Total deferred income tax liabilities	5,210,600	5,244,849	5,179,579
Net deferred income tax (assets) liabilities	($1,160,519)	$390,289	($1,081,804)
(1) In 2009, this amount is the total of $2,054,306 for tax depreciation (primarily bonus depreciation) less
$681,920 for deferred taxes and $189,228 for prior period accrued income taxes.
(2) In 2010, this amount is the total of $601,407 for tax depreciation less $133,329 for deferred taxes
from prior period reconciliation.
(3) In 2011, this amount is the total of $224,073 for tax depreciation less $5,258 for deferred taxes
plus $468,755 for prior period accrued income taxes.

The Company has net operating loss carry forwards available of approximately $12,000,000 as of September 30, 2011 that begin to expire at the end of 2019.