Income Tax Expense

3 Months Ended

Mar. 31, 2014

Income Tax Expense [Abstract]

Income Tax Expense [Text Block]

INCOME TAX EXPENSE

	Quarter Ended
	March 31,
	2014			2013
Millions
Current Tax Expense (Benefit)
Federal (a)	—				$0.2
State (a)	—			—
Total Current Tax Expense (Benefit)	—			0.2
Deferred Tax Expense (Benefit)
Federal		$6.3			$5.8
State	2.7			1.7
Investment Tax Credit Amortization	(0.2		)	(0.2		)
Total Deferred Tax Expense	8.8			7.3
Total Income Tax Expense		$8.8			$7.5

(a) For the quarter ended March 31, 2014, the federal and state current tax expense of zero was due to the utilization of NOL carryforwards from prior periods. For the quarter ended March 31, 2013, the federal and state current tax expense of $0.2 million and zero, respectively, was due to federal and state NOLs which resulted from the bonus depreciation provision of the American Taxpayer Relief Act of 2012. The federal and state NOLs remaining after utilization in 2014 will be carried forward to offset future taxable income.

For the quarter ended March 31, 2014, the effective tax rate was 20.7 percent (18.8 percent for the quarter ended March 31, 2013). The increase from the effective tax rate for the quarter ended March 31, 2013, was primarily due to higher pretax income. The effective tax rate deviated from the statutory rate of approximately 41 percent primarily due to deductions for AFUDC–Equity, investment tax credits, renewable tax credits and depletion.

Uncertain Tax Positions. As of March 31, 2014, we had gross unrecognized tax benefits of $1.2 million ($1.2 million as of December 31, 2013). Of the total gross unrecognized tax benefits, $0.2 million represents the amount of unrecognized tax benefits included in the Consolidated Balance Sheet that, if recognized, would favorably impact the effective income tax rate. The unrecognized tax benefit amounts have been presented as reductions to the tax benefits associated with NOL and tax credit carryforwards on the Consolidated Balance Sheet (see Note 1. Operations and Significant Accounting Policies).

ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate state income tax returns in various jurisdictions. ALLETE is no longer subject to federal examination for years before 2009, or state examination for years before 2005.

In September 2013, the U.S. Treasury issued final regulations addressing the tax consequences associated with the acquisition, production and improvement of tangible property. The regulations are generally effective for tax years beginning January 1, 2014. As ALLETE is adopting certain utility-specific guidance for deductible repairs previously issued by the IRS, the final regulation did not have a material impact on our consolidated financial statements.