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Effective Tax Rate and Unrecognized Tax Benefits
9 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
EFFECTIVE TAX RATE AND UNRECOGNIZED TAX BENEFITS
EFFECTIVE TAX RATE AND UNRECOGNIZED TAX BENEFITS
Effective Tax Rate
See Note 5 to the financial statements of each registrant in Item 8 of the Form 10-K for additional tax information.
Southern Company
Southern Company's effective tax rate is typically lower than the statutory rate due to its employee stock plans' dividend deduction and non-taxable AFUDC equity.
Southern Company's effective tax rate was 33.9% for the nine months ended September 30, 2014 compared to 33.9% for the corresponding period in 2013. The effective tax rate was impacted by the offsetting increases resulting from higher net income and less benefit related to investment tax credits, and decreases resulting from more non-taxable AFUDC equity, changes in state apportionment, and beneficial changes in certain state income tax laws.
Alabama Power
Alabama Power's effective tax rate was 39.0% for the nine months ended September 30, 2014 compared to 39.3% for the corresponding period in 2013.
Georgia Power
Georgia Power's effective tax rate was 37.2% for the nine months ended September 30, 2014 compared to 38.0% for the corresponding period in 2013.
Gulf Power
Gulf Power's effective tax rate was 37.4% for the nine months ended September 30, 2014 compared to 37.6% for the corresponding period in 2013.
Mississippi Power
Mississippi Power's effective tax rate was (45.5)% for the nine months ended September 30, 2014 compared to (42.1)% for the corresponding period in 2013. The change in the tax benefit was primarily due to an increase in non-taxable AFUDC equity related to the construction of the Kemper IGCC, partially offset by a lower net loss for the current period compared to the corresponding period in 2013.
Southern Power
Southern Power's effective tax rate was 14.4% for the nine months ended September 30, 2014 compared to 20.5% for the corresponding period in 2013. The decrease was primarily due to the impact of state apportionment changes which reduced Southern Power's deferred tax liabilities, a change in filing method for North Carolina income tax, an increase in state income tax credits, and beneficial changes in certain state income tax laws. The decrease was partially offset by less federal income tax benefit related to investment tax credits in the current year.
Unrecognized Tax Benefits
For the 2013 tax year, Southern Company included in its consolidated federal income tax return a deduction for R&E expenditures related to the Kemper IGCC. The Kemper IGCC is based on first-of-a-kind technology, and Mississippi Power and Southern Company believe that a significant portion of the plant costs qualify as deductible R&E under Internal Revenue Code Section 174. The IRS is currently reviewing the underlying support for the deduction, but has not completed its audit of these expenditures. Due to the uncertainty related to this tax position, Mississippi Power and Southern Company recorded an unrecognized tax benefit of approximately $100 million and associated interest of $2 million as of September 30, 2014.
The ultimate outcome of this matter cannot be determined at this time.