Income Tax Expense (Tables)

12 Months Ended

Dec. 31, 2011



Income Tax Expense
Year Ended December 31	2011			2010			2009
Millions
Current Tax Expense (Benefit)
Federal (a)		$1.4		$(23.0)			$(42.6)
State (a)	(1.6		)	1.3			(1.8		)
Total Current Tax Expense (Benefit)	(0.2		)	(21.7		)	(44.4		)
Deferred Tax Expense
Federal (b)	27.3			61.4			66.0
State (b)	9.5			5.3			10.3
Change in Valuation Allowance	(0.1		)	0.2			(0.1		)
Investment Tax Credit Amortization	(0.9		)	(0.9		)	(1.0		)
Total Deferred Tax Expense	35.8			66.0			75.2
Total Income Tax Expense		$35.6			$44.3			$30.8

(a)

For the year ended December 31, 2011, the federal and state current tax expense (benefit) of $1.4 million and $(1.6) million, respectively, was due to an NOL which resulted primarily from the bonus depreciation provision of the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010. The 2011 federal and state NOLs will be carried forward to offset future taxable income. For the year ended December 31, 2010, we recorded a federal current tax benefit as a result of tax planning initiatives and the bonus depreciation provision in the Small Business Jobs Act of 2010. The 2010 federal NOL was partially utilized by carrying it back against prior years' income with the remainder carried forward to offset future years' income. The 2009 federal current tax benefit was primarily due to the bonus depreciation provision of the American Recovery and Reinvestment Act of 2009.

(b)

The year ended December 31, 2011, included an income tax benefit of $2.9 million related to the MPUC approval of our request to defer the retail portion of the tax charge taken in 2010 as a result of PPACA and a benefit for the reversal of a $6.2 million deferred tax liability related to a revenue receivable that Minnesota Power agreed to forgo as part of a stipulation and settlement agreement in its 2010 rate case. Included in the year ended December 31, 2010, was a charge of $4.0 million as a result of PPACA. (See Note 5. Regulatory Matters.)

Reconciliation of Taxes from Federal Statutory Rate to Total Income Tax Expense [Table Text Block]



Reconciliation of Taxes from Federal Statutory
Rate to Total Income Tax Expense
Year Ended December 31	2011			2010			2009
Millions
Income Before Non-Controlling Interest and Income Taxes		$129.2			$119.1			$91.5
Statutory Federal Income Tax Rate	35		%	35		%	35		%
Income Taxes Computed at 35 percent Statutory Federal Rate		$45.2			$41.7			$32.0
Increase (Decrease) in Tax Due to:
State Income Taxes – Net of Federal Income Tax Benefit	6.0			4.5			5.4
Impact of PPACA	—			4.0			—
Deferred Accounting for Retail Portion of PPACA	(2.9		)	—			—
2010 Rate Case Stipulation Agreement - Deferred Tax Reversal	(6.2		)	—			—
Regulatory Differences for Utility Plant	(1.2		)	(2.0		)	(2.5		)
Production Tax Credits	(4.3		)	(1.6		)	(1.2		)
Other	(1.0		)	(2.3		)	(2.9		)
Total Income Tax Expense		$35.6			$44.3			$30.8

Deferred Tax Assets and Liabilities [Table Text Block]



Deferred Tax Assets and Liabilities
As of December 31	2011			2010
Millions
Deferred Tax Assets
Employee Benefits and Compensation		$132.7			$121.8
Property Related	56.4			51.1
NOL and Tax Credit Carryforward	78.1			28.2
Investment Tax Credits	9.0			9.7
Other	7.2			12.7
Gross Deferred Tax Assets	283.4			223.5
Deferred Tax Asset Valuation Allowance	(0.4		)	(0.5		)
Total Deferred Tax Assets		$283.0			$223.0
Deferred Tax Liabilities
Property Related		$482.7			$387.2
Regulatory Asset for Benefit Obligations	117.9			105.8
Unamortized Investment Tax Credits	12.8			13.7
Partnership Basis Differences	24.4			19.4
Other	24.0			27.3
Total Deferred Tax Liabilities		$661.8			$553.4
Net Deferred Income Taxes		$378.8			$330.4
Recorded as:
Net Current Deferred Tax Liabilities (a)		$5.2			$5.2
Net Long-Term Deferred Tax Liabilities	373.6			325.2
Net Deferred Income Taxes		$378.8			$330.4


(a)	Included in Other Current Liabilities.

NOL and Tax Credit Carryforwards [Table Text Block]



NOL and Tax Credit Carryforwards
Year Ended December 31	2011		2010
Millions
Federal NOL carryforward (a)		$162.0		$62.0
Federal tax credit carryforwards	8.4		3.7
State NOL carryforwards (a, b)	73.1		71.7
State tax credit carryforwards, net of federal offset	3.8		1.7


(a)	Pretax amounts


(b)	State NOL carryforwards include Minnesota, North Dakota and Florida.

Gross Unrecognized Income Tax Benefits [Table Text Block]



Gross Unrecognized Income Tax Benefits	2011			2010			2009
Millions
Balance at January 1		$12.3			$9.5			$8.0
Additions for Tax Positions Related to the Current Year	—			—			0.5
Reductions for Tax Positions Related to the Current Year	—			(0.2		)	—
Additions for Tax Positions Related to Prior Years	—			4.4			1.0
Reductions for Tax Positions Related to Prior Years	(0.9		)	—			—
Settlements	—			(0.3		)	—
Lapse of Statute	—			(1.1		)	—
Balance as of December 31		$11.4			$12.3			$9.5

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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