INCOME TAXES

The following table is a summary of income tax expense for each of the years ended December 31:



Income Taxes	2013			2012			2011
	(Millions of Dollars)

Current tax expense (benefit)	$	25.2		$	13.1		$	(166.7	)
Deferred income taxes, net	313.8			294.4			434.8
Investment tax credit, net	(1.1		)	(1.2		)	(4.2		)
Total Income Tax Expense	$	337.9		$	306.3		$	263.9

The provision for income taxes for each of the years ended December 31 differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income before income taxes as a result of the following:



	2013					2012					2011
				Effective					Effective					Effective
Income Tax Expense	Amount			Tax Rate		Amount			Tax Rate		Amount			Tax Rate
	(Millions of Dollars)
Expected tax at statutory federal tax rates	$	320.3		35.0	%	$	298.4		35.0	%	$	271.8		35.0	%
State income taxes net of federal tax benefit	49.0			5.3	%	43.3			5.1	%	40.1			5.2	%
Production tax credits	(16.7		)	(1.8	)%	(15.9		)	(1.9	)%	(8.7		)	(1.1	)%
Treasury Grant	(7.4		)	(0.8	)%	—			—	%	—			—	%
AFUDC - Equity	(6.4		)	(0.7	)%	(12.3		)	(1.4	)%	(20.8		)	(2.7	)%
Investment tax credit restored	(1.1		)	(0.1	)%	(1.2		)	(0.1	)%	(4.2		)	(0.5	)%
Domestic production activities deduction	—			—	%	(12.6		)	(1.5	)%	(12.6		)	(1.6	)%
Other, net	0.2			—	%	6.6			0.7	%	(1.7		)	(0.3	)%
Total Income Tax Expense	$	337.9		36.9	%	$	306.3		35.9	%	$	263.9		34.0	%

The components of deferred income taxes classified as net current assets and net long-term liabilities as of December 31 are as follows:



Deferred Tax Assets	2013		2012
	(Millions of Dollars)
Current
Future federal tax benefits	$	309.7	$	59.0
Employee benefits and compensation	13.8		14.9
Other	56.0		81.1
Total Current Deferred Tax Assets	379.5		155.0

Non-current
Deferred revenues	237.0		250.0
Employee benefits and compensation	95.6		97.0
Future federal tax benefits	32.5		334.7
Property-related	28.2		28.3
Construction advances	18.3		22.2
Other	62.9		16.3
Total Non-Current Deferred Tax Assets	474.5		748.5
Total Deferred Tax Assets	$	854.0	$	903.5



Deferred Tax Liabilities	2013		2012
	(Millions of Dollars)
Current
Prepaid items	$	69.5	$	49.7
Total Current Deferred Tax Liabilities	69.5		49.7

Non-current
Property-related	2,574.4		2,339.4
Employee benefits and compensation	238.5		244.3
Investment in transmission affiliate	169.9		144.9
Deferred transmission costs	50.8		45.7
Other	74.9		91.2
Total Non-current Deferred Tax Liabilities	3,108.5		2,865.5
Total Deferred Tax Liabilities	$	3,178.0	$	2,915.2

Consolidated Balance Sheet Presentation	2013		2012
Current Deferred Tax Asset	$	310.0	$	105.3
Non-Current Deferred Tax Liability	$	2,634.0	$	2,117.0

Consistent with rate-making treatment, deferred taxes are offset in the above table for temporary differences which have related regulatory assets or liabilities.

As of December 31, 2013, we had approximately $810.3 million and $58.6 million of net operating loss and tax credit carryforwards resulting in deferred tax assets of $283.6 million and $58.6 million, respectively. As of December 31, 2012, we had approximately $1,007.1 million and $41.2 million of net operating loss and tax credit carryforwards resulting in deferred tax assets of $352.5 million and $41.2 million, respectively. The tax credit and net operating loss carryforwards begin to expire in 2029. We anticipate that we will have future taxable income sufficient to utilize these deferred tax assets.

We previously adopted accounting guidance related to uncertainty in income taxes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2013			2012
	(Millions of Dollars)

Balance as of January 1	$	11.3		$	11.1
Additions for tax positions of prior years	—			10.8
Reductions for tax positions of prior years	(2.9		)	(10.6		)
Balance as of December 31	$	8.4		$	11.3

The amount of unrecognized tax benefits as of December 31, 2013 and 2012 excludes deferred tax assets related to uncertainty in income taxes of $8.4 million and $10.2 million, respectively. As of December 31, 2013, there were no unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations. As of December 31, 2012, the net amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations was approximately $1.0 million.

We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2013, 2012 and 2011, we recognized approximately $0.2 million, $0.2 million and $0.7 million, respectively, of accrued interest in the Consolidated Income Statements. For the years ended December 31, 2013 and 2012, we recognized no penalties in the Consolidated Income Statements. For the year ended 2011, we recognized a benefit of $0.3 million in the Consolidated Income Statements related to a reduction of accrued penalties. We had approximately $0.4 million and $0.3 million of interest accrued and no penalties accrued on the Consolidated Balance Sheets as of December 31, 2013 and 2012, respectively.

We do not anticipate any significant increases or decreases in the total amounts of unrecognized tax benefits within the next 12 months.

Our primary tax jurisdictions include the United States and the state of Wisconsin. Currently, the tax years of 2011 through 2013 are subject to Federal examination, and the tax years 2009 through 2013 are subject to examination by the state of Wisconsin.