4.	Income Taxes

Except to the extent noted below, the circumstances set forth in Note 5 to the consolidated financial statements included in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2011 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal Audit - NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy's 2007 federal income tax return expired in September 2011. The statute of limitations applicable to Xcel Energy's 2008 federal income tax return expires in September 2012. As of June 30, 2012, there was no federal income tax audit in progress.

State Audits - NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of June 30, 2012, NSP-Wisconsin's earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2007. As of June 30, 2012, there were no state income tax audits in progress.

Unrecognized Tax Benefits - The unrecognized tax benefit balance includes temporary tax positions of $1.3 million and $1.5 million at June 30, 2012 and Dec. 31, 2011, respectively, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The unrecognized tax benefit balance was reduced by the tax benefits associated with net operating loss (NOL) carryforwards. The amounts of tax benefits associated with NOL carryforwards are as follows:

(Millions of Dollars)		June 30, 2012				Dec. 31, 2011
NOL carryforwards		$	(1.0	)		$	(1.1	)

It is reasonably possible that NSP-Wisconsin's amount of unrecognized tax benefits could significantly change in the next 12 months as the Internal Revenue Service and state audits resume. At this time, due to the uncertain nature of the audit process, an overall range of possible change cannot be reasonably estimated.

The payable for interest related to unrecognized tax benefits is offset by the interest benefit associated with NOL carryforwards. The payables for interest related to unrecognized tax benefits at June 30, 2012 and Dec. 31, 2011 were not material. No amounts were accrued for penalties related to unrecognized tax benefits as of June 30, 2012 or Dec. 31, 2011.