8. INCOME TAX

An estimate of annual income tax expense is made each interim period using estimates for annual pre-tax income, regulatory flow-through adjustments, tax credits, and other items. The estimated annual effective tax rate is applied to year-to-date, pre-tax income to determine income tax expense for the interim period consistent with the annual estimate.

The effective income tax rate varied from the combined federal and state statutory tax rates due to the following:



	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in thousands	2014			2013			2014			2013
Income tax at statutory rates (federal and state)	$	728		$	1,330		$	26,449		$	26,569
Increase (decrease):
Differences required to be flowed-through by regulatory commissions	61			52			1,494			1,564
Other, net	(9		)	(44		)	(178		)	(835		)
Income tax expense	$	780		$	1,338		$	27,765		$	27,298
Effective income tax rate	42.1		%	38.6		%	41.6		%	40.7		%

The change in income tax expense for the three and six months ended June 30, 2014, compared to the same periods in 2013, is primarily due to a $0.6 million income tax charge related to a higher effective tax rate in Oregon, which required the revaluation of deferred tax balances in the first quarter of 2014. See Note 9 in the 2013 Form 10-K for more detail on income taxes and effective tax rates.

The Company’s examination by the Internal Revenue Service (IRS) for tax years 2009 through 2011 was completed during the first quarter of 2014. The examination did not result in a material change to the returns as originally filed or previously adjusted for net operating loss carrybacks. The 2012 tax year is subject to examination, and the 2013 and 2014 tax years are subject to review under the Compliance Assurance Process with the IRS.