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INCOME TAXES

9 Months Ended

Sep. 30, 2014

(E)	INCOME TAXES

Differences in the treatment of certain transactions for book and tax purposes cause UIL Holdings’ overall effective tax rate to differ from the statutory tax rate. In accordance with ASC 740, we use an estimated annual effective tax rate approach to calculate interim period income tax expense for ordinary income. We also record separate income tax effects for significant unusual or infrequent items such as the Acquisition.

Consolidated income tax expense decreased $9.7 million for the first nine months of 2014, as compared to the first nine months of 2013 due primarily to a lower annualized effective tax rate and the Acquisition. The annualized effective tax rate decreased from 37.9% for the nine months ended September 30, 2013 to 32.9% for the nine months ended September 30, 2014 due primarily to the absence in 2014 of non-normalized CTA amortization as well as favorable changes in state flow through depreciation.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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