Income Taxes (MEC) (MidAmerican Energy Company and Subsidiaries [Member])

12 Months Ended

Dec. 31, 2012

MidAmerican Energy Company and Subsidiaries [Member]

Income Tax Disclosure [Line Items]

Income Tax Disclosure [Text Block]

(10) Income Taxes

MidAmerican Energy's income tax (benefit) expense consists of the following for the years ended December 31 (in millions):

	2012			2011			2010
Current:
Federal	$	(256	)	$	(474	)	$	(161	)
State	(21		)	(6		)	(25		)
	(277		)	(480		)	(186		)
Deferred:
Federal	200			453			125
State	(20		)	11			14
	180			464			139
Investment tax credits	(2		)	(1		)	(2		)
Total	$	(99	)	$	(17	)	$	(49	)

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:

	2012		2011		2010
Federal statutory income tax rate	35	%	35	%	35	%
Income tax credits	(56	)	(32	)	(27	)
State income tax, net of federal income tax benefit	(10	)	1		(2	)
Income tax method changes	(6	)	(10	)	(17	)
Effects of ratemaking	—		—		(3	)
Other, net	(2	)	—		(2	)
Effective federal and state income tax rate	(39	)%	(6	)%	(16	)%

Income tax credits primarily relate to production tax credits. MidAmerican Energy's wind-powered generating facilities are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities were placed in service.

MidAmerican Energy changed the methods by which it determines current income tax deductions for repair costs ("Repairs Deduction") and administrative and general costs ("A&G Deduction") related to certain of its regulated utility assets. These changes result in current deductibility for those costs, which are capitalized for book purposes. MidAmerican Energy was allowed to retroactively apply the method changes and deduct amounts related to prior years' costs on the tax return that includes the year of change. State utility rate regulation in Iowa requires that the tax effect of certain temporary differences be flowed through immediately to customers. Therefore, amounts that would otherwise have been recognized in income tax expense have been included as changes in regulatory assets in recognition of MidAmerican Energy's ability to recover increased tax expense when such temporary differences reverse. This treatment of such temporary differences impacts income tax expense and effective income tax rates from year to year.

Accordingly, earnings for the year ended December 31, 2012 reflect $16 million of income tax benefits recognized in connection with the Repairs Deduction for income tax years prior to 2012 related to MidAmerican Energy's regulated electric utility transmission and distribution assets. Earnings for the year ended December 31, 2010 reflect $17 million of income tax benefits recognized in connection with the Repairs Deduction for tax years prior to 2010 related to MidAmerican Energy's regulated natural gas utility assets and jointly owned regulated electric utility assets. MidAmerican Energy's A&G Deduction computed for tax years prior to 2010 resulted in the recognition of $44 million of income tax benefits in earnings for the year ended December 31, 2010. In 2011, MidAmerican Energy recognized $35 million of income tax benefits in conjunction with the partial resolution of certain tax issues related to tax positions taken for these income tax method changes.

MidAmerican Energy's net deferred income tax liability consists of the following as of December 31 (in millions):

	2012			2011
Deferred income tax assets:
Regulatory liabilities	$	311		$	300
Employee benefits	83			96
Derivative contracts	32			48
Asset retirement obligations	132			122
Other	76			56
Total deferred income tax assets	634			622
Deferred income tax liabilities:
Depreciable property	(2,422		)	(2,183		)
Regulatory assets	(353		)	(333		)
Other	(26		)	(18		)
Total deferred income tax liabilities	(2,801		)	(2,534		)
Net deferred income tax liability	$	(2,167	)	$	(1,912	)
Reflected as:
Current assets - other	$	—		$	6
Current liabilities - other	(3		)	—
Deferred income taxes	(2,164		)	(1,918		)
	$	(2,167	)	$	(1,912	)

As of December 31, 2012, MidAmerican Energy has available $21 million of state carryforwards, principally for net operating losses, that expire at various intervals between 2013 and 2031.

The United States Internal Revenue Service has closed examination of MEHC's income tax returns through February 2006, including components related to MidAmerican Energy. In addition, state jurisdictions have closed examination of MidAmerican Energy's income tax returns through February 2006.

A reconciliation of the beginning and ending balances of MidAmerican Energy's net unrecognized tax benefits is as follows for the years ended December 31 (in millions):

	2012			2011
Beginning balance	$	46		$	79
Additions based on tax positions related to the current year	10			8
Additions for tax positions of prior years	25			4
Reductions based on tax positions related to the current year	(16		)	(2		)
Reductions for tax positions of prior years	(23		)	(41		)
Statute of limitations	(3		)	(1		)
Settlements	(2		)	—
Interest and penalties	(1		)	(1		)
Ending balance	$	36		$	46

As of December 31, 2012 and 2011, substantially all of MidAmerican Energy's unrecognized tax benefits of $36 million and $46 million, respectively, if recognized, would have an impact on the effective tax rate. The unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility.