Note 12— Income Taxes

The following table shows our provision for income taxes (in millions) and our consolidated effective federal and state income tax rates for the applicable periods ended September 30:

	Three Months Ended						Nine Months Ended						Twelve Months Ended
	2015			2014			2015			2014			2015			2014
Consolidated provision for income taxes	$	15.3		$	13.7		$	28.1		$	32.5		$	34.8		$	41.3
Consolidated effective federal and state income tax rates	37.6		%	36.5		%	37.6		%	36.7		%	37.6		%	36.7		%

The effective income tax rate for the three, nine and twelve month periods ended September 30, 2015 is higher than comparable periods in 2014 primarily due to lower equity AFUDC income in 2015 compared to 2014.

We do not have any unrecognized tax benefits as of September 30, 2015. We did not recognize any significant interest or penalties in any of the periods presented. We do not expect any significant changes to our unrecognized tax benefits over the next twelve months.

The Tax Increase Prevention Act (the “Act”) was signed into law on December 19, 2014. The Act restored several expired business tax provisions, including bonus depreciation for 2014. Due to the reinstatement of bonus depreciation, we generated approximately $74.1 million of tax net operating losses (NOLs) during 2014, resulting in approximately $26.0 million in deferred tax assets. These losses may be carried back two years and are also available to offset future taxable income until 2034. Our 2015 tax liability is expected to be higher than 2014, assuming that congressional action does not extend bonus depreciation. However, we expect to utilize investment tax credits and NOLs to partially offset the 2015 tax payments.

In 2010, we received $17.7 million of investment tax credits based on our investment in Iatan 2. We utilized $0.7 million and $9.0 million of these credits on our 2012 and 2013 tax returns, respectively. Due to the passage of the Act, we were unable to use these credits on our 2014 tax return. We expect to use between $5.0 million and $7.0 million of the remaining credits on our 2015 tax return. The tax credits will have no significant income statement impact because the credits reduce the overall cost of service to our customers by lowering their rates over the life of the plant.

On September 13, 2013, the IRS and the Treasury Department released final regulations under Sections 162(a) and 263(a) on the deduction and capitalization of expenditures related to tangible property. These regulations apply to tax years beginning on or after January 1, 2014, and we utilized the book capitalization method as allowable under the final regulations on our 2014 tax return. Our utilization of the book capitalization method did not have a significant impact on the effective tax rate.