Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes

7. Income Taxes

The following table details the effective tax rates for the three months ended March 31, 2012 and 2011.

	Three Months Ended
	March 31,
	2012		2011
DPL	26.0	%	36.3	%

Income tax expense for the three months ended March 31, 2012 and 2011 were calculated using the estimated annual effective income tax rates for 2012 and 2011 and reflect estimated annual effective income tax rates of 25.6% and 33.7%, respectively. Management estimates the annual effective tax rate based upon its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the rates estimated could be materially different from the actual effective tax rates.

For the three months ended March 31, 2011, DPL increased income tax expense by $1.8 million by increasing deferred state income taxes by $2.0 million and decreasing other estimated tax liabilities by $0.2 million.

For the three months ended March 31, 2012, the decrease in DPL's effective tax rate compared to the same period in 2011 primarily reflects decreased pre-tax earnings.

Deferred tax liabilities for DPL decreased by approximately $6.3 million during the three months ended March 31, 2012. These decreases were primarily related to amortization and depreciation.

The Internal Revenue Service began an examination of our 2008 Federal income tax return during the second quarter of 2010 and has continued through the current quarter. At this time, we do not expect the results of this examination to have a material impact on our financial statements.

DP&L [Member]

Income Taxes

 

7. Income Taxes

The following table details the effective tax rates for the three months ended March 31, 2012 and 2011.

	Three Months Ended
	March 31,
	2012		2011
DP&L	31.3	%	34.0	%

Income tax expenses for the three months ended March 31, 2012 and 2011 were calculated using the estimated annual effective income tax rates for 2012 and 2011 and reflect estimated annual effective income tax rates of 31.1% and 33.7%, respectively. Management estimates the annual effective tax rate based upon its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the rates estimated could be materially different from the actual effective tax rates.

For the three months ended March 31, 2012, the decrease in DP&L's effective tax rate compared to the same period in 2011 primarily reflects decreased pre-tax book income and increased Section 199 Domestic Production Deduction benefits.

Deferred tax liabilities for DP&L decreased by approximately $3.7 million during the three months ended March 31, 2012. These decreases were primarily related to depreciation.

The Internal Revenue Service began an examination of our 2008 Federal income tax return during the second quarter of 2010 and has continued through the current quarter. At this time, we do not expect the results of this examination to have a material impact on our financial statements.