Note 8 - Income Taxes

Questar

Details of Questar's income tax expense and deferred income taxes are provided in the following tables. The components of income tax expense were as follows:



	Year Ended December 31,
	2014			2013			2012
	(in millions)
Federal
Current	$	69.6		$	66.5		$	1.3
Deferred	47.5			18.4			112.0
State
Current	6.9			10.7			—
Deferred	2.1			5.9			3.6
Deferred investment tax credits recognized	(0.2		)	(0.2		)	(0.4		)
Total income tax expense	$	125.9		$	101.3		$	116.5

The difference between the statutory federal income tax rate and the Company's effective income tax rate is explained as follows:



	Year Ended December 31,
	2014		2013		2012
Federal income taxes statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in rate as a result of:
State income taxes, net of federal income tax benefit	1.6		4.0		1.0
Tax benefits from dividends paid to employee stock plan	(1.0	)	(1.0	)	(0.5	)
Other	0.1		0.6		—
Effective income tax rate	35.7	%	38.6	%	35.5	%

The combined federal and state income tax rate was lower in 2014 due to research and development and state tax credits and an increase in the domestic production deduction. The 2013 combined effective federal and state income tax rate increased due to the impairment of Southern Trails Pipeline. There was no state tax benefit recorded in association with the impairment charge because the Company has limited state operations for Southern Trails Pipeline. The effective combined federal and state income tax rate also increased in 2013 due to adjustments to estimated state income taxes for the consolidated Questar return that were in excess of state income taxes calculated on a separate return basis for the operating companies.

Significant components of Questar's deferred income taxes were as follows:



	December 31,
	2014			2013
	(in millions)
Deferred income taxes - noncurrent
Deferred tax liabilities
Property, plant and equipment	$	827.0		$	797.5
Employee benefits	52.0			30.2
Other	0.5			4.9
Deferred tax liabilities - noncurrent	879.5			832.6
Deferred tax assets
Asset retirement obligations	22.5			22.7
Pension and other postretirement benefits	110.8			73.7
Deferred compensation	15.7			14.5
Hedging activities	13.2			13.4
State tax credits	3.3			3.4
Valuation allowance	(1.6		)	(2.3		)
Deferred tax assets, net of allowance - noncurrent	163.9			125.4
Net deferred income tax liability - noncurrent	$	715.6		$	707.2

Deferred income taxes - current
Deferred tax assets - current	$	15.7		$	10.1
Deferred tax liabilities - current	9.9			0.4
Net deferred income tax asset - current	$	5.8		$	9.7

Questar Gas

Details of Questar Gas's income tax expense and deferred income taxes are provided in the following tables. The components of income tax expense were as follows:



	Year Ended December 31,
	2014			2013			2012
	(in millions)
Federal
Current	$	(11.9	)	$	6.0		$	(18.7	)
Deferred	42.4			23.5			45.1
State
Current	(1.9		)	0.6			—
Deferred	3.6			2.0			1.2
Deferred investment tax credit recognized	(0.2		)	(0.2		)	(0.4		)
Total income tax expense	$	32.0		$	31.9		$	27.2

The difference between the statutory federal income tax rate and Questar Gas's effective income tax rate is explained as follows:



	Year Ended December 31,
	2014		2013		2012
Federal income taxes statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in rate as a result of:
State income taxes, net of federal income tax benefit	1.3		2.1		1.0
Amortization of investment tax credits related to rate-regulated assets	(0.2	)	(0.3	)	(0.4	)
Other	0.6		0.9		1.0
Effective income tax rate	36.7	%	37.7	%	36.6	%

Significant components of Questar Gas's deferred income taxes were as follows:



	December 31,
	2014			2013
	(in millions)
Deferred income taxes - noncurrent
Deferred tax liabilities
Property, plant and equipment	$	354.4		$	322.6
Employee benefits	23.5			14.0
Other	0.5			4.9
Deferred tax liabilities - noncurrent	378.4			341.5
Deferred tax assets
Deferred compensation	0.9			0.8
Deferred tax assets - noncurrent	0.9			0.8
Net deferred income tax liability - noncurrent	$	377.5		$	340.7

Deferred income taxes - current
Deferred tax assets - current	$	3.6		$	3.3
Deferred tax liabilities - current	9.9			0.4
Net deferred income tax asset (liability) - current	$	(6.3	)	$	2.9

Questar Pipeline

Details of Questar Pipeline's income tax expense and deferred income taxes are provided in the following tables. The components of income tax expense were as follows:



	Year Ended December 31,
	2014		2013			2012
	(in millions)
Federal
Current	$	21.9	$	20.2		$	(5.4	)
Deferred	11.6		(15.2		)	40.4
State
Current	1.0		1.3			1.6
Deferred	1.1		0.7			0.7
Total income tax expense	$	35.6	$	7.0		$	37.3

The difference between the statutory federal income tax rate and Questar Pipeline's effective income tax rate is explained as follows:



	Year Ended December 31,
	2014		2013		2012
Federal income taxes statutory rate	35.0	%	35.0	%	35.0	%
Increase in rate as a result of:
State income taxes, net of federal income tax benefit	1.5		8.5		1.6
Other	0.5		2.6		—
Effective income tax rate	37.0	%	46.1	%	36.6	%

The 2013 combined effective federal and state income tax rate increased due to the impairment of Southern Trails Pipeline. There was no state tax benefit recorded in association with the impairment charge because the company has limited state operations for Southern Trails Pipeline.

Significant components of Questar Pipeline's deferred income taxes were as follows:



	December 31,
	2014			2013
	(in millions)
Deferred income taxes - noncurrent
Deferred tax liabilities
Property, plant and equipment	$	246.1		$	237.1
Employee benefits	10.8			7.4
Deferred tax liabilities - noncurrent	256.9			244.5
Deferred tax assets
Deferred compensation	2.0			1.8
Hedging activities	13.2			13.4
State tax credits	0.7			0.7
Valuation allowance	(0.4		)	—
Deferred tax assets, net of allowance - noncurrent	15.5			15.9
Net deferred income tax liability - noncurrent	$	241.4		$	228.6

Net deferred income tax asset - current	$	1.9		$	1.8