Income Taxes

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

Income Taxes

10. Income Taxes

The following table provides a summary of the current and deferred components of income tax expense for the periods presented.

			Years Ended December 31,
			2011		2010		2009
			(In thousands)
Current income taxes
	Federal		$	24,174	$	33,656	$	(25,027)
	State			(5,098)		11,254		646
		Total current income taxes		19,076		44,910		(24,381)
Deferred income taxes
	Federal			66,925		50,551		102,871
	State			8,838		1,340		13,610
		Total deferred income taxes		75,763		51,891		116,481
Total income tax expense			$	94,839	$	96,801	$	92,100
Effective tax rate				36%		40%		38%

The principal components of the Company's deferred tax assets (liabilities) at the dates indicated are as follows:

			December 31,
			2011		2010
			(In thousands)
Deferred income tax assets:
	Other post retirement benefits		$	12,773	$	3,948
	Derivative financial instruments (interest rates)			3,580		11,799
	Other			19,877		21,180
		Total deferred income tax assets		36,230		36,927
Deferred income tax liabilities:
	Property, plant and equipment			(559,133)		(476,680)
	Other			(6,601)		(12,662)
		Total deferred income tax liabilities		(565,734)		(489,342)
Net deferred income tax liability				(529,504)		(452,415)
	Less current income tax assets			8,780		13,894
Accumulated deferred income taxes			$	(538,284)	$	(466,309)

The actual income tax expense differs from the amount computed by applying the statutory federal tax rate of 35 percent to income before income taxes as follows:

		Years Ended December 31,
		2011		2010		2009
		(In thousands)
Computed statutory income tax expense at 35%		$	92,223	$	85,560	$	84,810
Changes in income taxes resulting from:
	State income taxes, net of federal income tax benefit		2,431		8,436		9,267
	Permanent differences and other		185		2,805		(1,977)
Total income tax expense		$	94,839	$	96,801	$	92,100

A reconciliation of the changes in unrecognized tax benefits for the periods presented is as follows:

		Years ended December 31,
		2011		2010
		(In thousands)
Beginning of the year		$	1,478	$	1,478
Additions:
	Tax positions taken in prior years		-		-
	Tax positions taken in current year		-		-
Reductions:
	Lapse of statute of limitations		-		-
End of year		$	1,478	$	1,478

As of December 31, 2011, the Company has $ 1.5 million ($1.4 million, net of federal tax) of unrecognized tax benefits, none of which would impact the Company's EITR if recognized. The Company does not expect that its unrecognized tax benefits will be reduced within the next twelve months.

The Company's policy is to classify and accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense in its Consolidated Statement of Operations, which is consistent with the recognition of these items in prior reporting periods.

Southern Union and the Company are no longer subject to U.S. federal, state or local examinations for the tax period ended December 31, 2004 and prior years, except June 30, 2004, to the extent of $1.3 million of refund claims.