2.2.0.25falsefalse0205 - Disclosure - Income Taxestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
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<!-- Begin Block Tagged Note 5 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. INCOME TAXES</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Southern Company files a consolidated federal income tax return and combined state income tax
returns for the States of Alabama, Georgia, and Mississippi. Under a joint consolidated income tax
allocation agreement, each subsidiary’s current and deferred tax expense is computed on a
stand-alone basis and no subsidiary is allocated more expense than would be paid if it filed a
separate income tax return. In accordance with IRS regulations, each company is jointly and
severally liable for the tax liability.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Current and Deferred Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Details of income tax provisions are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11"><i>(in millions)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal —
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Current
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>42</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">771</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">628</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>898</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">177</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>940</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">811</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">805</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">State —
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Current
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(54</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">72</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>140</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(15</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>86</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">85</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>1,026</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">896</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">915</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net cash payments for income taxes in 2010, 2009, and 2008 were $276 million, $975 million, and
$537 million, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The tax effects of temporary differences between the carrying amounts of assets and liabilities in
the financial statements and their respective tax bases, which give rise to deferred tax assets and
liabilities, are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><i>(in millions)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax liabilities —
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accelerated depreciation
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>6,833</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">5,938</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Property basis differences
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,150</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">986</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Leveraged lease basis differences
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>263</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">251</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Employee benefit obligations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>485</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">384</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Under recovered fuel clause
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>179</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">271</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Premium on reacquired debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>78</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Regulatory assets associated with employee benefit obligations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>814</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">939</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Regulatory assets associated with asset retirement obligations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>509</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">486</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>246</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>10,557</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,571</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax assets —
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Federal effect of state deferred taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>386</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">302</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">State effect of federal deferred taxes
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>50</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Employee benefit obligations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,179</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,435</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Over recovered fuel clause
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>40</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other property basis differences
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>119</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">132</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred costs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>100</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cost of removal
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>52</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">109</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unbilled revenue
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>126</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other comprehensive losses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>69</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Asset retirement obligations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>509</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">486</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>523</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">458</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,153</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,391</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities, net
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,404</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,180</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Portion included in prepaid expenses (accrued income taxes), net
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>117</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">229</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred state tax assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>91</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Valuation allowance
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(58</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated deferred income taxes
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>7,554</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,455</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2010, Southern Company had a State of Georgia net operating loss (NOL)
carryforward totaling $0.9 billion, which could result in net state income tax benefits of $53
million, if utilized. However, Southern Company has established a valuation allowance for the
potential $53 million tax benefit due to the remote likelihood that the tax benefit will be
realized. These NOLs expire between 2011 and 2021. Beginning in 2002, the State of Georgia
allowed Southern Company to file a combined return, which has prevented the creation of any
additional NOL carryforwards.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2010, the tax-related regulatory assets and liabilities were $1.3 billion and $237
million, respectively. These assets are attributable to tax benefits flowed through to customers
in prior years, to deferred taxes previously recognized at rates lower than the current enacted tax
law, and to taxes applicable to capitalized interest. In 2010, $82 million was deferred as a
regulatory asset related to the impact of the Patient Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act of 2010 (together, the Acts). The Acts eliminated the
deductibility of healthcare costs that are covered by federal Medicare subsidy payments. These
liabilities are attributable to deferred taxes previously recognized at rates higher than the
current enacted tax law and to unamortized investment tax credits.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with regulatory requirements, deferred investment tax credits are amortized over the
life of the related property with such amortization normally applied as a credit to reduce
depreciation in the statements of income. Credits amortized in this manner amounted to $23 million
in 2010, $24 million in 2009, and $23 million in 2008. At December 31, 2010, all investment tax
credits available to reduce federal income taxes payable had been utilized.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On September 27, 2010, the Small Business Jobs and Credit Act of 2010 (SBJCA) was signed into law.
The SBJCA includes an extension of the 50% bonus depreciation for certain property acquired and
placed in service in 2010 (and for certain long-term construction projects to be placed in service
in 2011). Additionally, on December 17, 2010, the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act (Tax Relief Act) was signed into law. Major tax incentives
in the Tax Relief Act include 100% bonus depreciation for property placed in service after
September 8, 2010 and through 2011 (and for certain long-term construction projects to be placed in
service in 2012) and 50% bonus depreciation for property placed in service in 2012 (and for certain
long-term
construction projects to be placed in service in 2013). The application of the bonus depreciation
provisions in these acts in 2010 significantly increased deferred tax liabilities related to
accelerated depreciation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Effective Tax Rate</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the federal statutory income tax rate to the effective income tax rate is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal statutory rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>35.0</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">35.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">State income tax, net of federal deduction
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1.8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.6</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee stock plans dividend deduction
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(1.2</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1.4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1.3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-deductible book depreciation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>0.8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.8</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Difference in prior years’ deferred and current tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(0.1</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.2</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">AFUDC-Equity
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(2.2</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2.7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1.9</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Production activities deduction
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.4</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">ITC basis difference
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(0.4</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leveraged lease termination
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">MC Asset Recovery
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Donations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(0.2</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(0.1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1.0</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Effective income tax rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>33.5</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">34.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">33.6</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Southern Company’s effective tax rate is lower than the statutory rate primarily due to the
employee stock plans’ dividend deduction and AFUDC equity, which is not taxable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Southern Company’s 2010 effective tax rate decreased from 2009 primarily due to the $202 million
charge recorded for the MC Asset Recovery litigation settlement in 2009, which completed and
resolved all claims by MC Asset Recovery against Southern Company. Southern Company is currently
evaluating potential recovery of the settlement payment through various means including insurance,
claims in U.S. Bankruptcy Court, and other avenues. The degree to which any recovery is realized
will determine, in part, the final income tax treatment of the settlement payment. The ultimate
outcome of any such recovery and/or income tax treatment cannot be determined at this time. The
decrease in Southern Company’s effective tax rate was partially offset by the elimination of the
production activities deduction in 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The American Jobs Creation Act of 2004 created a tax deduction for a portion of income attributable
to U.S. production activities as defined in Section 199 of the Internal Revenue Code
(production activities deduction). The
deduction is equal to a stated percentage of qualified production activities net income. The
percentage was phased in over the years 2005 through 2010. For 2008 and 2009, a 6% reduction was
available to Southern Company. Thereafter, the allowed rate is 9%; however, due to increased tax
deductions from bonus depreciation and pension contributions, there was no domestic production
deduction available to Southern Company for 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Unrecognized Tax Benefits</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For 2010, the total amount of unrecognized tax benefits increased by $97 million, resulting in a
balance of $296 million as of December 31, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Changes during the year in unrecognized tax benefits were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11"><i>(in millions)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unrecognized tax benefits at beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>199</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">146</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">264</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax positions from current periods
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>62</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax positions increase from prior periods
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>62</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">130</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax positions decrease from prior periods
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right"><b>(27</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to settlements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(297</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reductions due to expired statute of limitations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at end of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>296</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">146</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The tax positions from current periods relate primarily to the Georgia state tax credits
litigation, tax accounting method change for repairs, and other miscellaneous uncertain tax
positions. The tax positions increase from prior periods relates primarily to the tax accounting
method change for repairs and other miscellaneous positions. The tax positions decrease from prior
periods relates
primarily to the Georgia state tax credit litigation and miscellaneous tax positions. See Note 3
under “Income Tax Matters — Georgia State Income Tax Credits” and “Tax Method of Accounting for
Repairs” for additional information.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The impact on Southern Company’s effective tax rate, if recognized, is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11"><i>(in millions)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax positions impacting the effective tax rate
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>217</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">143</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax positions not impacting the effective tax rate
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>79</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance of unrecognized tax benefits
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>296</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">199</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">146</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The tax positions impacting the effective tax rate primarily relate to Georgia state tax credit
litigation at Georgia Power and the production activities deduction tax position. However, as
discussed in Note 3 under “Income Tax Matters,” if Georgia Power is successful in its claim against
the Georgia DOR, a significant portion of the tax benefit is expected to be deferred and returned
to retail customers and therefore no material impact to net income is expected. The tax positions
not impacting the effective tax rate relate to the timing difference associated with the tax
accounting method change for repairs. These amounts are presented on a gross basis without
considering the related federal or state income tax impact. See Note 3 under “Income Tax Matters
— Georgia State Income Tax Credits” and “Tax Method of Accounting for Repairs” for additional
information.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Accrued interest for unrecognized tax benefits was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td style="border-bottom: 1px solid #000000"> </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11"><i>(in millions)</i></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest accrued at beginning of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>21</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">31</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest reclassified due to settlements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(49</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest accrued during the year
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>8</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at end of year
</div></td>
<td> </td>
<td align="right"><b>$</b></td>
<td align="right"><b>29</b></td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">21</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">15</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="13" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Southern Company classifies interest on tax uncertainties as interest expense. The net amount of
interest accrued during 2010 was primarily associated with the Georgia state tax credit litigation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Southern Company did not accrue any penalties on uncertain tax positions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">It is reasonably possible that the amount of the unrecognized tax benefits associated with a
majority of Southern Company’s unrecognized tax positions will significantly increase or decrease
within the next 12 months. The resolution of the Georgia state tax credit litigation would
substantially reduce the balances. The conclusion or settlement of state audits could also impact
the balances significantly. At this time, an estimate of the range of reasonably possible outcomes
cannot be determined.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The IRS has audited and closed all tax returns prior to 2007. The audits for the state returns
have either been concluded, or the statute of limitations has expired, for years prior to 2006.
</div>
</div>
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