15. TAXES

Components of income tax expense are detailed in the following tables.



	Three Months Ended June 30						Year to Date June 30
Great Plains Energy	2013			2012			2013			2012
Current income taxes	(millions)
Federal	$	—		$	(3.3	)	$	—		$	(3.3	)
State	0.2			0.4			0.1			0.3
Total	0.2			(2.9		)	0.1			(3.0		)
Deferred income taxes
Federal	27.6			30.8			37.5			22.5
State	5.7			5.1			8.0			4.3
Total	33.3			35.9			45.5			26.8
Noncurrent income taxes
Federal	—			(0.2		)	—			(0.2		)
State	(0.2		)	—			(0.2		)	—
Foreign	(0.2		)	(0.4		)	(0.3		)	(0.1		)
Total	(0.4		)	(0.6		)	(0.5		)	(0.3		)
Investment tax credit amortization	(0.4		)	(0.6		)	(0.9		)	(1.2		)
Income tax expense	$	32.7		$	31.8		$	44.2		$	22.3



	Three Months Ended June 30						Year to Date June 30
KCP&L	2013			2012			2013			2012
Current income taxes	(millions)
Federal	$	(0.3	)	$	0.1		$	(0.6	)	$	0.2
State	(0.1		)	0.1			(0.1		)	0.1
Total	(0.4		)	0.2			(0.7		)	0.3
Deferred income taxes
Federal	16.6			19.4			20.6			16.1
State	3.7			4.2			5.0			4.1
Total	20.3			23.6			25.6			20.2
Noncurrent income taxes
Federal	0.6			(0.3		)	1.1			0.1
State	0.1			(0.1		)	0.2			—
Total	0.7			(0.4		)	1.3			0.1
Investment tax credit amortization	(0.3		)	(0.4		)	(0.5		)	(0.9		)
Income tax expense	$	20.3		$	23.0		$	25.7		$	19.7

Effective Income Tax Rates

Effective income tax rates reflected in the financial statements and the reasons for their differences from the statutory federal rates are detailed in the following tables.



	Three Months Ended June 30				Year to Date June 30
Great Plains Energy	2013		2012		2013		2012
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
Differences between book and tax depreciation not normalized	(0.3	)	1.2		0.2		3.0
Amortization of investment tax credits	(0.4	)	(0.7	)	(0.6	)	(1.8	)
Federal income tax credits	(3.8	)	(3.6	)	(5.0	)	(8.6	)
State income taxes	3.8		3.9		3.9		4.1
Changes in uncertain tax positions, net	(0.3	)	(0.4	)	(0.4	)	(0.1	)
Valuation allowance	—		0.1		—		0.1
Other	(0.1	)	—		(0.1	)	(0.4	)
Effective income tax rate	33.9	%	35.5	%	33.0	%	31.3	%



	Three Months Ended June 30				Year to Date June 30
KCP&L	2013		2012		2013		2012
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
Differences between book and tax depreciation not normalized	(0.7	)	1.3		(0.1	)	2.7
Amortization of investment tax credits	(0.4	)	(0.7	)	(0.6	)	(1.4	)
Federal income tax credits	(5.7	)	(4.9	)	(7.7	)	(9.3	)
State income taxes	3.8		4.0		3.8		4.1
Changes in uncertain tax positions, net	(0.1	)	—		(0.1	)	—
Other	(0.3	)	(0.2	)	(0.4	)	(1.1	)
Effective income tax rate	31.6	%	34.5	%	29.9	%	30.0	%

Deferred Income Taxes

At June 30, 2013, Great Plains Energy's current deferred income tax asset decreased $66.0 million and noncurrent deferred income tax liability decreased $16.8 million compared to December 31, 2012, primarily due to the reclassification of $60.3 million of net operating losses from current deferred income tax asset to noncurrent deferred income tax liability driven by the expected timing of their utilization due to the extension of 50% bonus depreciation with the January 2, 2013, enactment of the American Taxpayer Relief Act of 2012. The decrease in noncurrent deferred income tax liability was offset by an increase in temporary differences mostly as a result of bonus depreciation.

Uncertain Tax Positions

At June 30, 2013, and December 31, 2012, Great Plains Energy had $22.0 million and $21.4 million, respectively, of liabilities related to unrecognized tax benefits. Of these amounts, $6.7 million and $7.3 million at June 30, 2013, and December 31, 2012, respectively, were expected to impact the effective tax rate if recognized.

At June 30, 2013, and December 31, 2012, KCP&L had $11.8 million and $10.5 million, respectively, of liabilities related to unrecognized tax benefits. None of these amounts were expected to impact the effective tax rate if recognized.

The following table reflects activity for Great Plains Energy and KCP&L related to the liability for unrecognized tax benefits.



		Great Plains Energy								KCP&L
	June 30, 2013				December 31, 2012				June 30, 2013				December 31, 2012
		(millions)
Beginning balance January 1		$	21.4			$	24.0			$	10.5			$	8.7
Additions for current year tax positions		1.8				3.7				1.8				3.6
Reductions for current year tax positions		(0.2		)		—				—				—
Reductions for prior year tax positions		(0.5		)		(1.8		)		(0.5		)		(1.6		)
Statute expirations		(0.2		)		(4.7		)		—				(0.2		)
Foreign currency translation adjustments		(0.3		)		0.2				—				—
Ending balance		$	22.0			$	21.4			$	11.8			$	10.5

Great Plains Energy and KCP&L recognize interest related to unrecognized tax benefits in interest expense and penalties in non-operating expenses. At June 30, 2013, and December 31, 2012, amounts accrued for interest related to unrecognized tax benefits for Great Plains Energy were $3.3 million and $3.5 million, respectively. Amounts accrued for penalties with respect to unrecognized tax benefits for Great Plains Energy were $0.6 million and $0.7 million at June 30, 2013, and December 31, 2012, respectively. At June 30, 2013, and December 31, 2012, amounts accrued for interest and penalties with respect to unrecognized tax benefits for KCP&L were insignificant.

The IRS is currently auditing Great Plains Energy and its subsidiaries for the 2009 tax year. In July 2013, the IRS provided guidance to the Company regarding the audit of certain income tax accounting methods for the capitalization of assets. Based on this new guidance, the Company expects to reduce unrecognized tax benefits for these income tax accounting methods by $11.8 million for Great Plains Energy and KCP&L in the third quarter of 2013. This $11.8 million reduction in unrecognized tax benefits will be offset by an increase to deferred income tax liabilities since a significant portion of the unrecognized tax benefits were related to temporary tax differences. The Company also estimates that it is reasonably possible that $0.9 million for Great Plains Energy of other unrecognized tax benefits may be recognized in the next twelve months due to statute expirations or settlement agreements with tax authorities.