9. Income Taxes

Income tax expense components for the years ended December 31 are as follows (in thousands):

	2012			2011			2010

Current income taxes:
Federal	$	1,552		$	(8,604	)	$	7,713
State		708			(2,120	)		1,057

TOTAL		2,260			(10,724	)		8,770
Deferred income taxes:
Federal		28,210			39,096			17,942
State		4,018			6,297			4,349

TOTAL		32,228			45,393			22,291
Investment tax credit amortization		(329	)		(371	)		(528	)

TOTAL INCOME TAX EXPENSE	$	34,159		$	34,298		$	30,533

Deferred Income Taxes

Deferred tax assets and liabilities are reflected on our consolidated balance sheet as follows (in thousands):

	December 31,

Deferred Income Taxes	2012		2011
Current deferred tax assets, net⁽¹⁾	$	13,000	$	6,688

Non-current deferred tax liabilities, net		301,967		263,933

NET DEFERRED TAX LIABILITIES	$	288,967	$	257,245

(1): Current deferred tax assets are included in prepaid expenses and other on the face of the balance sheet.

Temporary differences related to deferred tax assets and deferred tax liabilities are summarized as follows (in thousands):

	December 31,

Temporary Differences	2012		2011
Deferred tax assets:
Net operating loss	$	13,000	$	6,688
Disallowed plant costs		1,010		1,097
Gains on hedging transactions		1,389		1,454
Plant related basis differences		21,571		21,044
Regulated liabilities related to income taxes		13,871		13,318
Carry forward of income tax credit		3,722		16,304
Pensions and other post-retirement benefits		693		—
Deferred fuel costs		785		—
Other		1,477		891

Total deferred tax assets	$	57,518	$	60,796

Deferred tax liabilities:
Depreciation, amortization and other plant related differences	$	279,604	$	253,743
Regulated assets related to income		39,553		40,555
Loss on reacquired debt		4,489		4,288
Pensions and other post-retirement benefits		—		673
Amortization of intangibles		7,009		5,929
Deferred fuel costs		—		2,662
Other		15,830		10,191

Total deferred tax liabilities		346,485		318,041

NET DEFERRED TAX LIABILITIES	$	288,967	$	257,245

Effective Income Tax Rates

The difference between income taxes and amounts calculated by applying the federal legal rate to income tax expense for continuing operations were as follows:

Effective Income Tax Rates

Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit)	3.1		3.1		3.1
Investment tax credit amortization	(0.4	)	(0.4	)	(0.7	)
Effect of ratemaking on property related differences	(0.2	)	0.2		(0.8	)
Effect of Medicare part D changes	—		—		2.7
Other	0.5		0.5		(0.1	)

EFFECTIVE INCOME TAX RATE	38.0	%	38.4	%	39.2	%

Unrecognized Tax Benefits	2012		2011			2010

Unrecognized tax benefits — January 1,	$	—	$	359,000		$	906,000
The gross amounts of increases in unrecognized tax benefits taken during prior periods		—		—			—
The gross amounts of decreases in unrecognized tax benefits taken during the period relating to positions accepted by taxing authorities		—		—			—
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations		—		(359,000	)		(547,000	)

UNRECOGNIZED TAX BENEFITS — December 31,	$	—	$	—		$	359,000

We do not expect any significant changes to our unrecognized tax benefits over the next twelve months. The reserve balance related to unrecognized tax benefits as of December 31, 2010 was $359,000. With the running of the statute of limitations on these unrecognized tax benefits on September 15, 2011, there are no unrecognized tax benefits at December 31, 2012 and 2011.

As of December 31, 2012, we have federal and state income tax net operating loss (NOL) carryforwards totaling $27.2 million, which expire in 2031.

We received $17.7 million, of investment tax credits based on our investment in Iatan 2. We utilized less than $0.2 million of these credits when preparing our 2010 tax return as utilization of the credits was limited by alternative minimum tax rules. We expect to utilize approximately $1.8 million of these credits on our 2012 tax return. We expect to use the remaining credits over the 2013 and 2014 tax years. The tax credit will have no significant income statement impact as the credits will flow to our customers as we amortize the tax credits over the life of the plant.

We received a $26.6 million payment received from the SWPA during 2010 which was deferred and treated as a noncurrent liability for book purposes. We increased our current tax liability by $10.0 million during 2010 in recognition that the $26.6 million payment may be considered taxable income in 2010. An agreement was reached with the IRS in 2011 that allowed us to defer recognition for tax purposes of approximately $26.1 million utilizing "like-kind exchange" rules within the Code. Accordingly, we reduced our current tax liability based on the agreement and will recognize the $26.1 million for tax purposes over more than 50 years.

As part of an agreement reached in our 2009 Missouri electric rate case, effective September 10, 2010, we also agreed to commence an eighteen year amortization of a regulatory asset related to the tax benefits of cost of removal. These tax benefits were flowed through to customers from 1981 – 2008 and totaled approximately $11.1 million. We recorded the regulatory asset expecting to recover these benefits from customers in future periods. Based on the agreement, we estimated the portion of the amortization period from which we would not receive rate recovery for this item and wrote off approximately $1.2 million in the first quarter of 2010. Amortization resumed during 2011 and the remaining balance as of December 31, 2012 was approximately $9.6 million.

The American Taxpayer Relief Act of 2012 (the "Act") was signed into law on January 2, 2013. The Act restored several expired business tax provisions, including bonus depreciation for 2013. We expect the extension of bonus depreciation will reduce our tax payments slightly during 2013 and 2014 as the Company will utilize investment tax credits noted above at a slower rate.