The provisions for income taxes consist of the following:



	2012			2011			2010
Current expense (benefit):
Federal	$	(909	)	$	10,447		$	(8,577	)
State	2,735			2,227			1,848
Total current expense (benefit)	1,826			12,674			(6,729		)
Deferred expense	53,593			51,174			64,022
Investment tax credit amortization	(346		)	(351		)	(368		)
Total income tax expense	$	55,073		$	63,497		$	56,925

A reconciliation from the U.S. federal statutory tax rate to our effective tax rate is as follows:



	2012		2011		2010
U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
Difference in tax rate due to:
State income taxes, net of federal	4.1		1.6		4.3
Other, net	(0.6	)	1.0		(0.6	)
Effective tax rate	38.5	%	37.6	%	38.7	%

Pennsylvania utility ratemaking practice permits the flow through to ratepayers of state tax benefits resulting from accelerated tax depreciation. For Fiscal 2012, Fiscal 2011 and Fiscal 2010, the beneficial effects of state tax flow through of accelerated depreciation reduced tax expense by $3,198, $7,926 and $2,552, respectively. The state tax flow through amounts in Fiscal 2012 and Fiscal 2011 reflect the impact of 2010 U.S. Federal tax legislation that allowed taxpayers to fully deduct qualifying capital expenditures incurred after September 8, 2010, through the end of calendar 2011, when such property is placed in service before 2012. This legislation was also permitted for Pennsylvania state corporate income tax purposes.

Deferred tax liabilities (assets) comprise the following at September 30:



	2012			2011
Excess book basis over tax basis of property, plant and equipment	$	330,937		$	293,457
Goodwill	26,998			22,446
Regulatory assets	140,416			124,669
Other	601			487
Gross deferred tax liabilities	498,952			441,059
Pension plan liabilities	(72,652		)	(62,818		)
Allowance for doubtful accounts	(1,489		)	(2,642		)
Deferred investment tax credits	(1,914		)	(2,057		)
Employee-related expenses	(4,859		)	(8,032		)
Regulatory liabilities	(11,761		)	(12,378		)
Environmental liabilities	(7,195		)	(7,749		)
Derivative financial instruments	(16,264		)	(11,931		)
Other	(12,202		)	(14,512		)
Gross deferred tax assets	(128,336		)	(122,119		)
Net deferred tax liabilities	$	370,616		$	318,940

We join with UGI and its subsidiaries in filing a consolidated federal income tax return. We are charged or credited for our share of current taxes resulting from the effects of our transactions in the UGI consolidated federal income tax return including giving effect to intercompany transactions. UGI’s federal income tax returns are settled through the tax year 2009.

We file separate company income tax returns in a number of states but are subject to state income tax principally in Pennsylvania. Pennsylvania income tax returns are generally subject to examination for a period of three years after the filing of the respective returns.

During Fiscal 2012, Fiscal 2011 and Fiscal 2010, interest (income) expense of $(209), $219 and $25, respectively, was recognized in income taxes in the Consolidated Statements of Income. As of September 30, 2012, we have unrecognized income tax benefits totaling $1,104 including related accrued interest of $56. If these unrecognized tax benefits were subsequently recognized, $33 would be recorded as a benefit to income taxes on the consolidated statement of income and, therefore, would impact the effective tax rate. Generally, a net reduction in unrecognized tax benefits could occur because of expiration of the statute of limitations in certain jurisdictions or as a result of settlements with tax authorities. Included in the balance at September 30, 2012, are $1,048 of tax positions for which the deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, the disallowance of the current deduction would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. There are no expected changes in unrecognized tax benefits and related interest in the next twelve months.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:



Balance at September 30, 2009	$	634
Additions for tax positions of the current year	3,907
Additions for tax positions of prior years	9
Decreases for tax positions related to prior years	(25		)
Settlements with tax authorities	(331		)
Balance at September 30, 2010	4,194
Additions for tax positions of the current year	920
Settlements with tax authorities	(216		)
Balance at September 30, 2011	4,898
Additions for tax positions of prior years	81
Settlements with tax authorities	(3,931		)
Balance at September 30, 2012	$	1,048

In accordance with accounting guidance regarding uncertain tax positions, during Fiscal 2012 and Fiscal 2011, the Company added $124 and $1,195, respectively, to its liability for unrecognized tax benefits including interest related to its change in method of accounting for capitalizing certain repairs and maintenance costs associated with its Gas Utility and Electric Utility assets beginning with the tax year ended September 30, 2009. However, because this tax matter relates only to the timing of deductibility, we have recorded an offsetting deferred tax asset of an equal amount. For further information regarding the regulatory impact of this change, see Note 4.