Note 8 – Income Taxes

Income tax position differs from the amount computed by applying the federal statutory rate to pre-tax income or loss as demonstrated in the table below:


	Three Months Ended March 31,
	2014			2013

Tax expense at statutory rate of 34%	$	2,737,798		$	2,616,860
State income tax, net of Federal tax expense		272,491			296,676
Amortization of deferred investment tax credits		(5,265	)		(5,265	)
Adjustment to tax return filed		40,914			—
Other		(12,082	)		655


Total income tax expense		3,033,856			2,908,926
Discontinued operations		10,729			(11,034	)


Income tax expense from continuing operations	$	3,044,585		$	2,897,892

The “Adjustment to tax return filed” line above for the three months ended March 31, 2014 includes an income tax adjustment of $40,914 related to the correction of income tax items related to 2012 recorded during the three months ended March 31, 2014.

The Company files its income tax returns on a consolidated basis. Rate-regulated operations record cumulative increases in deferred taxes as income taxes recoverable from customers. The Company uses the deferral method to account for investment tax credits as required by regulatory commissions. Deferred income taxes are determined using the asset and liability method, under which deferred tax assets and liabilities are measured based upon the temporary differences between the financial statement and income tax basis of assets and liabilities, using current tax rates.

Tax positions must meet a more-likely-than-not recognition threshold to be recognized. The Company has no unrecognized tax benefits that would have a material impact to the Company’s financial statements for any open tax years. No adjustments were recognized for uncertain tax positions for the three months ended March 31, 2014 and 2013.

The Company recognizes interest and penalties related to unrecognized tax benefits in operating expense. As of March 31, 2014 and December 31, 2013, there were no unrecognized tax benefits nor interest or penalties accrued related to unrecognized tax benefits. For the three months ended March 31, 2014 and 2013, the Company did not recognize any interest or penalties related to unrecognized tax benefits.

The Company, or one or more of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years after 2009 for federal and state returns remain open to examination by the major taxing jurisdictions in which the Company operates.