Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes

Income Taxes

F.            Income Taxes

The Company estimates an annual effective income tax rate based on projected results for the year and applies this rate to income before taxes to calculate income tax expense.  Any refinements made due to subsequent information that affects the estimated annual effective income tax rate are reflected as adjustments in the current period.

The Company’s effective income tax rate for the six months ending June 30, 2012 was 36.4%.  The effective income tax rate for the six months ended June 30, 2011 was 36.8%. The decrease in the effective tax rate from 2011 was attributable to a decrease in state taxes primarily as a result of lower pre-tax income on state tax paying entities in 2012 and an increased benefit related to equity funds of regulated businesses in 2012 partially offset by lower tax reserves recorded in 2011.

During the second quarter of 2012 and 2011, the Company finalized settlements with the Internal Revenue Service (IRS) relating to its research and experimentation tax credits claimed from 2006 through 2009 and from 2001 through 2005, respectively.  Except for refund claims from 2004 and 2005 related to tax losses carried back to those years, the consolidated federal income tax liability of the Company has been settled with the IRS through 2005.  The Company is currently under audit for the 2006 through 2009 periods.  The examination of these periods began in the second quarter of 2010. The Company also is the subject of various state income tax examinations.  The Company believes that it is appropriately reserved for any uncertain tax positions.