INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Text Block [Abstract]

Differences between Income Tax Expense and Amount Obtained by Multiplying Pre-Tax Income by U.S. Statutory Federal Income Tax Rate

Income tax expense differs from the amount of income tax determined by applying the United States statutory federal income tax rate of 35% to pre-tax income due to the following:

	UNS Energy									TEP
	Years Ended December 31,
	2013			2012			2011			2013			2012			2011
	Millions of Dollars
Federal Income Tax Expense at Statutory Rate	$	65		$	51		$	62		$	52		$	37		$	48
State Income Tax Expense, Net of Federal Deduction	8			7			8			7			5			6
Federal/State Tax Credits	(2		)	(1		)	(3		)	(2		)	(1		)	(2		)
Allowance for Equity Funds Used During Construction	(2		)	(1		)	(1		)	(1		)	(1		)	(1		)
Deferred Tax Asset Valuation Allowance	—			—			—			2			—			—
Investment Tax Credit Basis Adjustment - Creation of Regulatory Asset	(11		)	—			—			(11		)	—			—
Other	—			—			1			1			(1		)	1
Total Federal and State Income Tax Expense	$	58		$	56		$	67		$	48		$	39		$	52

Schedule Of Income Tax Reconciliation Table

Income tax expense included in the income statements consists of the following:

	UNS Energy									TEP
	Years Ended December 31,
	2013			2012			2011			2013			2012			2011
	Millions of Dollars
Current Tax Expense (Benefit):
Federal	$	(11	)	$	(2	)	$	(7	)	$	(8	)	$	(4	)	$	(5	)
State	(2		)	(2		)	(2		)	(2		)	(2		)	(2		)
Total Current Tax Expense (Benefit)	(13		)	(4		)	(9		)	(10		)	(6		)	(7		)
Deferred Tax Expense (Benefit):
Federal	61			51			64			47			38			50
Federal Investment Tax Credits	(1		)	—			(1		)	(1		)	—			(1		)
State	11			9			13			12			7			10
Total Deferred Tax Expense (Benefit)	71			60			76			58			45			59
Total Federal and State Income Tax Expense	$	58		$	56		$	67		$	48		$	39		$	52

Schedule of Deferred Tax Assets and Liabilities

The significant components of deferred income tax assets and liabilities consist of the following:

	UNS Energy						TEP
	December 31,						December 31,
	2013			2012			2013			2012
	Millions of Dollars
Gross Deferred Income Tax Assets:
Capital Lease Obligations	$	127		$	141		$	127		$	141
Net Operating Loss Carryforwards	94			72			104			85
Customer Advances and Contributions in Aid of Construction	33			34			19			19
Alternative Minimum Tax Credit	43			43			24			24
Accrued Postretirement Benefits	23			23			23			23
Renewable Energy Credit Up-Front Incentive Payments	—			26			—			20
Emission Allowance Inventory	10			10			10			10
Unregulated Investment Losses	7			9			—			—
Other	50			44			44			43
Total Gross Deferred Income Tax Assets	387			402			351			365
Deferred Tax Assets Valuation Allowance	(7		)	(7		)	(2		)	—
Gross Deferred Income Tax Liabilities:
Plant – Net	(708		)	(648		)	(615		)	(571		)
Capital Lease Assets – Net	(47		)	(34		)	(47		)	(34		)
Pensions	(21		)	(23		)	(22		)	(24		)
PPFAC	(5		)	(6		)	(2		)	(3		)
Other	(21		)	(15		)	(20		)	(15		)
Total Gross Deferred Income Tax Liabilities	(802		)	(726		)	(706		)	(647		)
Net Deferred Income Tax Liabilities	$	(422	)	$	(331	)	$	(357	)	$	(282	)

Summary of Deferred Tax Liability Not Recognized

The net deferred income tax liability on the balance sheet is as follows:

	UNS Energy						TEP
	December 31,						December 31,
	2013			2012			2013			2012
	Millions of Dollars
Deferred Income Taxes – Current Assets	$	60		$	34		$	64		$	37
Deferred Income Taxes – Noncurrent Liabilities	(482		)	(365		)	(421		)	(319		)
Net Deferred Income Tax Liability	$	(422	)	$	(331	)	$	(357	)	$	(282	)

Summary Of Details Of Tax Carryforwards Table

As of December 31, 2013, UNS Energy and TEP had the following carryforward amounts:

	UNS Energy			TEP
	Amount		Expiring Year	Amount		Expiring Year
	Millions of Dollars			Millions of Dollars
Capital Loss	$	7	2015	$	—	N/A
Federal Net Operating Loss	266		2031-33	286		2031-33
State Net Operating Loss	30		2032-33	99		2016-33
State Credits	5		2016-18	6		2016-18
Alternative Minimum Tax Credit	43		None	24		None
Investment Tax Credits	6		2032-33	6		2032-33

Summary of Income Tax Contingencies

A reconciliation of the beginning and ending balances of unrecognized tax benefits follows:

	UNS Energy						TEP
	December 31,						December 31,
	2013			2012			2013			2012
	Millions of Dollars
Unrecognized Tax Benefits, Beginning of Year	$	30		$	29		$	23		$	24
Additions Based on Tax Positions Taken in the Current Year	2			5			1			3
Reductions of Positions from Prior Year Based on Tax Authority Ruling	(28		)	(4		)	(22		)	(4		)
Unrecognized Tax Benefits, End of Year	$	4		$	30		$	2		$	23