Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the amount of unrecognized tax benefit is as follows:



(Millions of Dollars)	Dec. 31, 2014		Dec. 31, 2013
Unrecognized tax benefit — Permanent tax positions	$	1.9	$	2.5
Unrecognized tax benefit — Temporary tax positions	10.0		5.9
Total unrecognized tax benefit	$	11.9	$	8.4

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:



(Millions of Dollars)	2014			2013			2012
Balance at Jan. 1	$	8.4		$	9.6		$	11.4
Additions based on tax positions related to the current year	3.7			3.9			1.9
Reductions based on tax positions related to the current year	(0.7		)	—			(1.5		)
Additions for tax positions of prior years	2.8			3.3			2.0
Reductions for tax positions of prior years	(1.2		)	(0.9		)	(4.2		)
Settlements with taxing authorities	(1.1		)	(7.5		)	—
Balance at Dec. 31	$	11.9		$	8.4		$	9.6

Tax Benefits Associated with NOL and Tax Credit Carryforwards

The unrecognized tax benefit amounts were reduced by the tax benefits associated with NOL and tax credit carryforwards. The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:



(Millions of Dollars)	Dec. 31, 2014			Dec. 31, 2013
NOL and tax credit carryforwards	$	(3.9	)	$	(7.0	)

NOL and Tax Credit Carryforwards

Other Income Tax Matters — NOL amounts represent the amount of the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31 were as follows:



(Millions of Dollars)	2014		2013
Federal NOL carryforward	$	319.5	$	315.5
Federal tax credit carryforwards	22.3		19.4
State NOL carryforwards	690.1		664.6
State tax credit carryforwards, net of federal detriment	12.2		11.2

Schedule of Effective Income Tax Rate Reconciliation

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The following reconciles such differences for the years ending Dec. 31:



	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
Increases (decreases) in tax from:
State income taxes, net of federal income tax benefit	2.8		3.0		2.3
Change in unrecognized tax benefits	(0.1	)	0.1		0.1
Regulatory differences — utility plant items	(2.1	)	(1.4	)	(0.6	)
Tax credits recognized, net of federal income tax expense	(0.8	)	(0.8	)	(0.6	)
Prescription drug tax benefit and Medicare Part D	—		—		(2.5	)
Other, net	0.1		(0.3	)	—
Effective income tax rate	34.9	%	35.6	%	33.7	%

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2014			2013			2012
Current federal tax (benefit) expense	$	9,550		$	(52,408	)	$	176,354
Current state tax (benefit) expense	2,611			(7,252		)	24,502
Current change in unrecognized tax (benefit) expense	6,548			(2,918		)	(3,447		)
Deferred federal tax expense	208,781			273,916			38,309
Deferred state tax expense (benefit)	26,196			38,243			(4,424		)
Deferred change in unrecognized tax expense (benefit)	(7,154		)	4,094			4,207
Deferred investment tax credits	(2,941		)	(2,935		)	(2,957		)
Total income tax expense	$	243,591		$	250,740		$	232,544

The components of deferred income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2014			2013			2012
Deferred tax expense excluding items below	$	254,142		$	335,580		$	41,233
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	(26,649		)	(19,616		)	(9,574		)
Tax benefit allocated to other comprehensive income and other	330			289			6,433
Deferred tax expense	$	227,823		$	316,253		$	38,092

Schedule of Deferred Tax Assets and Liabilities

The components of the net deferred tax liability (current and noncurrent) at Dec. 31 were as follows:



(Thousands of Dollars)	2014		2013
Deferred tax liabilities:
Differences between book and tax bases of property	$	2,467,260	$	2,197,685
Employee benefits	110,556		100,003
Other	140,080		132,436
Total deferred tax liabilities	$	2,717,896	$	2,430,124
Deferred tax assets:
NOL carryforward	$	143,158	$	137,043
Unbilled revenue - fuel costs	57,654		49,171
Rate refund	43,735		26,943
Tax credit carryforward	34,493		30,643
Regulatory liabilities	14,549		14,893
Deferred investment tax credits	13,781		14,905
Other	37,472		37,614
Total deferred tax assets	$	344,842	$	311,212
Net deferred tax liability	$	2,373,054	$	2,118,912

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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