Income Tax

12 Months Ended

Dec. 31, 2011

Disclosure Income Tax [Abstract]

Income Tax Text Block

10.        Income Tax

A reconciliation between income taxes calculated at the statutory federal tax rate and the provision for income taxes reflected in the consolidated financial statements is as follows:

Thousands, except percentages			2011		2010		2009
Income taxes at federal statutory rate		$	37,550	$	42,745	$	42,627
Increase (decrease):
	Current state income tax, net of federal tax benefit		4,945		5,803		5,568
	Amortization of investment and energy tax credits		(442)		(525)		(593)
	Differences required to be flowed-through by
	regulatory commissions		1,647		1,647		(116)
	Gains on company and trust-owned life insurance		(786)		(715)		(1,195)
	Other - net		468		507		380
Total provision for income taxes		$	43,382	$	49,462	$	46,671
Effective tax rate			40.4%		40.5%		38.3%

The provision (benefit) for current and deferred income taxes consists of the following:

Thousands			2011		2010		2009
Current
	Federal	$	130	$	(28,592)	$	6,221
	State		(929)		1,441		2,300
			(799)		(27,151)		8,521
Deferred
	Federal		35,481		69,159		31,937
	State		8,700		7,454		6,213
			44,181		76,613		38,150
	Total provision for income taxes	$	43,382	$	49,462	$	46,671
	Total income taxes paid	$	1,756	$	22,600	$	10,000

The following table summarizes the total provision (benefit) for income taxes for the regulated utility and non-utility business segments for the three years ended December 31:

Thousands			2011		2010		2009
Regulated utility:
	Current	$	(4,646)	$	(1,464)	$	871
	Deferred		50,152		47,741		40,829
	Deferred investment and energy tax credits		(422)		(525)		(593)
			45,084		45,752		41,107
Non-utility business segments:
	Current		3,846		(25,687)		7,650
	Deferred		(5,548)		29,397		(2,086)
			(1,702)		3,710		5,564
Total provision for income taxes		$	43,382	$	49,462	$	46,671

The following table summarizes the tax effect of significant items comprising our deferred income tax accounts for the two years ended December 31:

Thousands				2011		2010
Deferred tax liabilities:
	Plant and property		$	292,235	$	255,471
	Regulatory adjustment for income taxes paid			2,106		5,272
	Regulatory income tax assets			65,755		68,822
	Regulatory liabilities			35,638		23,159
	Non-regulated deferred tax liabilities			43,373		34,544
		Total	$	439,107	$	387,268
Deferred tax assets:
	Regulatory assets			(4,727)		(1,402)
	Unfunded pension and postretirement obligations			(5,119)		(4,342)
	Non-regulated deferred tax assets			(1,161)		(772)
	Alternative minimum tax credit carryforward			(1,626)		(1,702)
	Loss and credit carryforwards			(14,255)		(7,071)
		Total		(26,888)		(15,289)
Deferred income tax liabilities - net				412,219		371,979
Deferred investment tax credits				990		1,430
Deferred income taxes and investment tax credits			$	413,209	$	373,409

We have determined that we are more likely than not to realize all recorded deferred tax assets as of December 31, 2011.

We calculate our deferred tax assets and liabilities according to accounting guidance on income taxes, whereby deferred income taxes are generally determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax provisions are not recorded in the income statement for certain temporary differences where regulators require that we flow through deferred income tax benefits or expenses in the utility ratemaking process.

In September 2010, Congress passed the Unemployment Insurance, Reauthorization and Job Creation Act of 2010 (the Act) and the legislation was signed into law by President Obama. The Act extended for one year the temporary bonus depreciation rules first enacted in the Economic Stimulus Act of 2008 and subsequently renewed in the American Recovery and Reinvestment Act of 2009. Under the bonus depreciation provision, an additional first-year tax deduction was allowed for depreciation equal to 50 percent of the adjusted basis of qualified property through September 8, 2010, in the year the property was placed in service, with the remaining percentage recovered under the normal depreciation rules. In addition, on December 17, 2010, President Barack Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act), which allows 100 percent bonus depreciation for qualified property placed in service between September 9, 2010 through December 31, 2011. It also extended the 50% bonus depreciation deduction to qualifying property placed in service through 2012.

In 2011 the Company received a tax refund of $14.4 million for tax year2010. In addition, the companycarried back a portion of its 2010 net operating loss to tax year 2009 and received a refund of $22.3 million. In 2011 we filed an amended federal income tax return for 2009, primarily to report a deduction for repairs expense consistent with a change in accounting method approved by the IRS and in conformity with the deduction allowed by the IRS in its examination of years 2006-2008. The Company then amended its net operating loss carryback to tax year 2009. The result of the amended federal tax return for tax year 2009 and the amended net operating loss carryback is a federal income tax refund receivable of $3.5 million at December 31, 2011. The company estimates that it has a consolidatednet operating loss carryforward to 2012 of $33.7 million. The net operating loss carryforward will be carried forward to reduce our current tax liability in future years. We anticipate that we will be able to utilize the entire net operating loss carryforward before its expiration in twenty years.

For the year ended December 31, 2010, we reported taxable income for Oregon purposes due to lack of federal-state conformity with respect to the accelerated depreciation effects cited above. The Company recorded a current receivable of $3.5 million to reflect the excess of payments applied to year 2010 over the amount owed. The Company received this refund in the first quarter of 2012. As of January 1, 2011, Oregon conformed to federal rules including bonus depreciation. As a result, we anticipate generating an NOL for state purposes in 2011. Oregon does not allow NOL carrybacks, but allows NOLs to be carried forward for fifteen years. We expect to fully utilize the estimated NOL generated in 2011.

Uncertain tax positions are accounted for in accordance with accounting standards that require management's assessment of the expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. Until such positions are sustained by the taxing authorities, we would not recognize the tax benefits resulting from such positions and would report the tax effect as a liability in the Company's consolidated balance sheet. As of December 31, 2011, we had no uncertain tax positions.

The IRS completed its examination of the 2006 through 2008 tax years in 2011. The examination resulted in payments of $1.5 million of tax and $0.2 million of interest. The Oregon Department of Revenue (ODOR) completed its field examination of our 2006 through 2009 consolidated Oregon income tax returns and issued preliminary assessments. If sustained by the ODOR, these assessments would result in an additional state tax liability of approximately $0.8 million, including interest and penalties. The Company is engaged in discussions with ODOR to resolve these issues; however, uncertainty exists with respect to the outcome of the audit as a result of information not yet fully considered by the ODOR. Resolution is expected to be reached within the next 12 months, and we have determined that it is more-likely-than-not that we will prevail on these issues. As such, no amounts have been recorded in our financial statements as of December 31, 2011 related to this matter.

Interest and penalties related to any future income tax deficiencies are recorded within income tax expense in the consolidated statements of income.