Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

NOTE 3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income tax expenses from continuing operations for 2011, 2010, and 2009 for Entergy Corporation and Subsidiaries consist of the following:

	2011			2010			2009
	(In Thousands)
Current:
Federal	$	452,713		$	145,161		($	433,105	)
Foreign		130			131			154
State		152,711			19,313			(108,552	)
Total		605,554			164,605			(541,503	)
Deferred and non-current — net		(311,708	)		468,698			1,191,418
Investment tax credit adjustments — net		(7,583	)		(16,064	)		(17,175	)
Income tax expense from continuing operations	$	286,263		$	617,239		$	632,740

Income tax expenses (benefit) for 2011, 2010, and 2009 for Entergy’s Registrant Subsidiaries consist of the following:

2011	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal	($	12,448	)	($	30,106	)	($	136,800	)	($	9,466	)	$	14,641		($	33,045	)	$	139,529
State		(1,751	)		15,950			34,832			6,069			1,724			3,153			16,825
Total		(14,199	)		(14,156	)		(101,968	)		(3,397	)		16,365			(29,892	)		156,354
Deferred and non-current — net		148,978			105,827			(265,046	)		32,380			(201	)		80,993			(84,505	)
Investment tax credit adjustments — net		(2,014	)		(3,358	)		(3,197	)		(182	)		(302	)		(1,609	)		3,104
Income taxes (benefit)	$	132,765		$	88,313		($	370,211	)	$	28,801		$	15,862		$	49,492		$	74,953

2010	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal	$	114,821		$	196,230		$	73,174		$	13,722		($	114,382	)	($	10,607	)	($	4,102	)
State		(9,200	)		481			(4,324	)		5,959			1,427			1,060			3,328
Total		105,621			196,711			68,850			19,681			(112,955	)		(9,547	)		(774	)
Deferred and non-current — net		10,328			(117,426	)		918			31,415			129,880			53,539			60,305
Investment tax credit adjustments — net		(3,005	)		(3,407	)		(3,222	)		(985	)		(324	)		(1,609	)		(3,482	)
Income taxes	$	112,944		$	75,878		$	66,546		$	50,111		$	16,601		$	42,383		$	56,049

2009	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal	($	37,544	)	($	203,651	)	$	12,387		$	20,279		$	160,552		($	72,207	)	$	73,183
State		22,710			(12,416	)		(49,843	)		(2,181	)		1,098			2,478			(12,667	)
Total		(14,834	)		(216,067	)		(37,456	)		18,098			161,650			(69,729	)		60,516
Deferred and non-current — net		100,584			308,659			85,728			26,400			(145,981	)		108,253			39,866
Investment tax credit adjustments — net		(3,994	)		(3,407	)		(3,222	)		(1,103	)		(323	)		(1,609	)		(3,481	)
Income taxes	$	81,756		$	89,185		$	45,050		$	43,395		$	15,346		$	36,915		$	96,901

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2011, 2010, and 2009 are:

	2011			2010			2009
	(In Thousands)
Net income attributable to Entergy Corporation	$	1,346,439		$	1,250,242		$	1,231,092
Preferred dividend requirements of subsidiaries		20,933			20,063			19,958
Consolidated net income		1,367,372			1,270,305			1,251,050
Income taxes		286,263			617,239			632,740
Income before income taxes	$	1,653,635		$	1,887,544		$	1,883,790
Computed at statutory rate (35%)	$	578,772		$	660,640		$	659,327
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect		93,940			40,530			65,241
Regulatory differences - utility plant items		39,970			31,473			57,383
Equity component of AFUDC		(30,184	)		(16,542	)		(17,741	)
Amortization of investment tax credits		(14,962	)		(15,980	)		(16,745	)
Net-of-tax regulatory liability (a)		65,357			—			—
Deferred tax reversal on PPA settlement (a)		(421,819	)		—			—
Write-off of reorganization costs		—			(19,974	)		—
Tax law change-Medicare Part D		—			13,616			—
Decommissioning trust fund basis		—			—			(7,917	)
Capital gains / (losses)		—			—			(28,051	)
Flow-through / permanent differences		(17,848	)		(26,370	)		(31,745	)
Provision for uncertain tax positions		2,698			(43,115	)		(17,435	)
Valuation allowance		—			—			(40,795	)
Other - net		(9,661	)		(7,039	)		11,218
Total income taxes as reported	$	286,263		$	617,239		$	632,740
Effective Income Tax Rate		17.3	%		32.7	%		33.6	%

(a) See “Income Tax Audits - 2006-2007 IRS Audit” below for discussion of these items.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2011, 2010, and 2009 are:

2011	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income	$	164,891		$	203,027		$	473,923		$	108,729		$	35,976		$	80,845		$	64,197
Income taxes (benefit)		132,765			88,313			(370,211	)		28,801			15,862			49,492			74,953
Pretax income	$	297,656		$	291,340		$	103,712		$	137,530		$	51,838		$	130,337		$	139,150
Computed at statutory rate (35%)	$	104,180		$	101,969		$	36,299		$	48,136		$	18,143		$	45,618		$	48,703
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect		13,727			9,618			943			3,211			3,350			2,033			4,436
Regulatory differences - utility plant items		10,079			8,379			1,404			2,038			3,860			4,003			10,207
Equity component of AFUDC		(3,363	)		(3,181	)		(11,315	)		(2,963	)		(215	)		(1,322	)		(7,825	)
Amortization of investment tax credits		(1,992	)		(3,336	)		(3,168	)		(960	)		(295	)		(1,596	)		(3,480	)
Net-of-tax regulatory liability (a)		—			—			65,357			—			—			—			—
Deferred tax reversal on PPA settlement (a)		—			—			(421,819	)		—			—			—			—
Flow-through / permanent differences		(1,365	)		(836	)		(1,285	)		304			(4,983	)		88			529
Non-taxable dividend income		—			(11,364	)		(27,336	)		—			—			—			—
Benefit of Entergy Corporation expenses		—			(5,694	)		—			(21,248	)		(6,235	)		(16	)		16,559
Provision for uncertain tax positions		12,016			(7,144	)		(4,880	)		(2	)		2,241			717			5,878
Other — net		(517	)		(98	)		(4,411	)		285			(4	)		(33	)		(54	)
Total income taxes (benefit)	$	132,765		$	88,313		($	370,211	)	$	28,801		$	15,862		$	49,492		$	74,953
Effective Income Tax Rate		44.6	%		30.3	%		-357.0	%		20.9	%		30.6	%		38.0	%		53.9	%

(a) See “Income Tax Audits - 2006-2007 IRS Audit” below for discussion of these items.

2010	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income	$	172,618		$	190,738		$	231,435		$	85,377		$	31,114		$	66,200		$	82,624
Income taxes		112,944			75,878			66,546			50,111			16,601			42,383			56,049
Pretax income	$	285,562		$	266,616		$	297,981		$	135,488		$	47,715		$	108,583		$	138,673
Computed at statutory rate (35%)	$	99,947		$	93,316		$	104,293		$	47,421		$	16,700		$	38,004		$	48,536
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect		13,156			1,142			(10,618	)		1,245			1,387			424			2,206
Regulatory differences - utility plant items		6,126			(4,004	)		7,374			3,455			3,999			4,089			10,435
Equity component of AFUDC		(144	)		(1,547	)		(8,361	)		(1,643	)		(184	)		(1,525	)		(3,138	)
Amortization of investment tax credits		(2,983	)		(3,309	)		(3,192	)		(972	)		(313	)		(1,596	)		(3,480	)
Flow-through / permanent differences		(1,235	)		(7,996	)		(754	)		153			(4,883	)		236			(497	)
Non-taxable dividend income		—			(9,189	)		(23,603	)		—			—			—			—
Provision for uncertain tax positions		(2,100	)		7,200			2,200			700			(300	)		2,800			2,090
Other — net		177			265			(793	)		(248	)		195			(49	)		(103	)
Total income taxes	$	112,944		$	75,878		$	66,546		$	50,111		$	16,601		$	42,383		$	56,049
Effective Income Tax Rate		39.6	%		28.5	%		22.3	%		37.0	%		34.8	%		39.0	%		40.4	%

2009	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income	$	66,875		$	153,047		$	232,845		$	79,367		$	30,479		$	63,841		$	48,908
Income taxes		81,756			89,185			45,050			43,395			15,346			36,915			96,901
Pretax income	$	148,631		$	242,232		$	277,895		$	122,762		$	45,825		$	100,756		$	145,809
Computed at statutory rate (35%)	$	52,021		$	84,781		$	97,263		$	42,967		$	16,039		$	35,264		$	51,033
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect		9,617			6,487			5,095			2,508			1,339			1,509			4,033
Regulatory differences - utility plant items		19,275			10,303			14,463			1,365			(55	)		2,008			10,024
Equity component of AFUDC		(1,827	)		(1,898	)		(9,796	)		(1,037	)		(82	)		(1,831	)		(1,270	)
Amortization of investment tax credits		(3,972	)		(3,088	)		(3,192	)		(1,092	)		(324	)		(1,596	)		(3,480	)
Flow-through / permanent differences		4,158			1,208			2,257			718			(2,218	)		293			(3,192	)
Non-taxable dividend income		—			(6,627	)		(19,075	)		—			—			—			—
Benefit of Entergy Corporation expenses		978			(170	)		(24,231	)		(2,841	)		31			—			35,027
Provision for uncertain tax positions		—			(5,400	)		(17,700	)		800			(400	)		600			4,900
Other — net		1,506			3,589			(34	)		7			1,016			668			(174	)
Total income taxes	$	81,756		$	89,185		$	45,050		$	43,395		$	15,346		$	36,915		$	96,901
Effective Income Tax Rate		55.0	%		36.8	%		16.2	%		35.3	%		33.5	%		36.6	%		66.5	%

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2011 and 2010 are as follows:

	2011			2010
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($	7,349,990	)	($	6,572,627	)
Regulatory asset for income taxes - net		(430,807	)		(449,266	)
Power purchase agreements		(17,138	)		(265,429	)
Nuclear decommissioning trusts		(553,558	)		(439,481	)
Other		(686,006	)		(679,302	)
Total		(9,037,499	)		(8,406,105	)
Deferred tax assets:
Accumulated deferred investment tax credit		108,338			111,170
Pension and other post-employment benefits		315,134			161,730
Nuclear decommissioning liabilities		612,945			285,889
Sale and leaseback		217,430			256,157
Provision for regulatory adjustments		97,607			100,504
Provision for contingencies		28,504			28,554
Unbilled/deferred revenues		12,217			18,642
Customer deposits		14,825			15,724
Net operating loss carryforwards		253,518			123,710
Capital losses		12,995			56,602
Other		96,676			19,009
Valuation allowance		(85,615	)		(70,089	)
Total		1,684,574			1,107,602
Noncurrent accrued taxes (including unrecognized tax benefits)		(814,597	)		(1,261,455	)
Accumulated deferred income taxes and taxes accrued	($	8,167,522	)	($	8,559,958	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2011 are as follows:

Carryover Description	Carryover Amount		Year(s) of expiration
Federal net operating losses		$9 billion		2023-2031
State net operating losses		$8 billion		2012-2031
State capital losses		$162 million		2013-2015
Federal minimum tax credits		$79 million		never
Other federal and state credits		$80 million		2012-2031

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns.

Because it is more likely than not that the benefit from certain state net operating and capital loss carryovers will not be utilized, a valuation allowance of $66 million and $13 million has been provided on the deferred tax assets relating to these state net operating and capital loss carryovers, respectively.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2011 and 2010 are as follows:

2011	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($	1,375,502	)	($	1,224,422	)	($	1,085,047	)	($	608,596	)	($	169,538	)	($	892,707	)	($	505,369	)
Regulatory asset for income taxes - net		(64,204	)		(140,644	)		(121,388	)		(28,183	)		70,973			(59,812	)		(87,550	)
Power purchase agreements		94			3,938			(1	)		2,383			22			2,547			—
Nuclear decommissioning trusts		(53,789	)		(21,096	)		(22,441	)		—			—			—			(19,138	)
Deferred fuel		(82,452	)		(1,225	)		(4,285	)		718			(331	)		3,932			(8	)
Other		(107,558	)		(1,532	)		(26,373	)		(10,193	)		(18,319	)		(14,097	)		(9,333	)
Total	($	1,683,411	)	($	1,384,981	)	($	1,259,535	)	($	643,871	)	($	117,193	)	($	960,137	)	($	621,398	)
Deferred tax assets:
Accumulated deferred investment tax credits		16,843			31,367			28,197			2,437			592			6,769			22,133
Pension and OPEB		(75,399	)		92,602			19,866			(30,390	)		(11,713	)		(41,964	)		(19,593	)
Nuclear decommissioning liabilities		(104,862	)		(38,683	)		56,399			—			—			—			(47,360	)
Sale and leaseback		—			—			66,801			—			—			—			150,629
Provision for regulatory adjustments		—			97,608			—			—			—			—			—
Provision for contingencies		4,167			90			3,940			2,465			10,121			2,299			—
Unbilled/deferred revenues		15,222			(21,918	)		(7,108	)		8,990			2,707			14,324			—
Customer deposits		7,019			618			5,699			1,379			109			—			—
Rate refund		11,627			—			134			—			2			(3,924	)		—
Net operating loss carryforwards		—			—			39,153			—			—			58,546			—
Other		3,485			27,392			18,824			4,826			5,248			37,734			25,724
Total		(121,898	)		189,076			231,905			(10,293	)		7,066			73,784			131,533
Noncurrent accrued taxes (including unrecognized tax benefits)		(27,718	)		(206,752	)		(75,750	)		(6,271	)		(27,859	)		39,799			(165,981	)
Accumulated deferred income taxes and taxes accrued	($	1,833,027	)	($	1,402,657	)	($	1,103,380	)	($	660,435	)	($	137,986	)	($	846,554	)	($	655,846	)

2010	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($	1,213,900	)	($	1,114,183	)	($	1,135,092	)	($	564,928	)	($	206,739	)	($	881,037	)	($	474,446	)
Regulatory asset for income taxes - net		(87,848	)		(132,145	)		(138,131	)		(24,649	)		66,251			(53,906	)		(78,836	)
Power purchase agreements		582			102,581			(417,388	)		(766	)		(61	)		(6,851	)		—
Nuclear decommissioning trusts		(9,968	)		(978	)		(3,806	)		—			—			—			(4,102	)
Deferred fuel		(24,210	)		(935	)		(7,584	)		(4,521	)		(626	)		10,025			(60	)
Other		(123,524	)		(2,505	)		(21,971	)		(10,991	)		(13,839	)		(19,712	)		(15,234	)
Total	($	1,458,868	)	($	1,148,165	)	($	1,723,972	)	($	605,855	)	($	155,014	)	($	951,481	)	($	572,678	)
Deferred tax assets:
Accumulated deferred investment tax credits		17,623			32,651			29,417			2,502			706			7,327			20,944
Pension and OPEB		(64,774	)		70,954			7,922			(27,111	)		(11,527	)		(38,152	)		(18,255	)
Nuclear decommissioning liabilities		(173,666	)		(41,829	)		—			—			—			—			(69,610	)
Sale and leaseback		—			—			80,117			—			—			—			176,040
Provision for regulatory adjustments		—			100,504			—			—			—			—			—
Unbilled/deferred revenues		8,056			(23,853	)		6,892			8,914			1,538			15,775			—
Customer deposits		7,907			618			5,699			1,391			109			—			—
Rate refund		10,873			(5,386	)		131			—			—			(4,008	)		—
Net operating loss carryforwards		—			40			41			—			8			139,859			—
Other		13,589			26,468			25,897			14,585			21,310			28,508			16,486
Total		(180,392	)		160,167			156,116			281			12,144			149,309			125,605
Noncurrent accrued taxes (including unrecognized tax benefits)		(104,925	)		(419,125	)		(321,757	)		(55,585	)		(22,328	)		17,256			(178,447	)
Accumulated deferred income taxes and taxes accrued	($	1,744,185	)	($	1,407,123	)	($	1,889,613	)	($	661,159	)	($	165,198	)	($	784,916	)	($	625,520	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2011 are as follows:

Entergy Arkansas

Entergy Gulf States Louisiana

Entergy Louisiana

Entergy Mississippi

Entergy New Orleans

Entergy Texas

System Energy

Federal net operating losses

$374 million

—

$621 million

—

—

$197 million

$3 million

Year(s) of expiration

2028-2031

N/A

2029-2031

N/A

N/A

2028-2029

2031

State net operating losses

$28 million

$207 million

$975 million

—

—

—

—

Year(s) of expiration

2025

2023-2024

2023-2025

N/A

N/A

N/A

N/A

Federal minimum tax credits

$10 million

$18 million

—

—

—

$2 million

$1 million

Year(s) of expiration

never

never

N/A

N/A

N/A

never

never

Other federal credits

$2 million

$1 million

$1 million

$1 million

$1 million

—

$1 million

Year(s) of expiration

2024-2030

2024-2030

2024-2030

2024-2030

2024-2030

N/A

2024-2030

State credits

—

—

—

$8.3 million

—

$3.8 million

$12.8 million

Year(s) of expiration

N/A

N/A

N/A

2013-2016

N/A

2012-2027

2015-2016

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2011			2010			2009
	(In Thousands)
Gross balance at January 1	$	4,949,788		$	4,050,491		$	1,825,447
Additions based on tax positions related to the current year		211,966			480,843			2,286,759
Additions for tax positions of prior years		332,744			871,682			697,615
Reductions for tax positions of prior years		(259,895	)		(438,460	)		(372,862	)
Settlements		(841,528	)		(10,462	)		(385,321	)
Lapse of statute of limitations		(5,295	)		(4,306	)		(1,147	)
Gross balance at December 31		4,387,780			4,949,788			4,050,491
Offsets to gross unrecognized tax benefits:
Credit and loss carryovers		(3,212,397	)		(3,771,301	)		(3,349,589	)
Cash paid to taxing authorities		(363,266	)		(373,000	)		(373,000	)
Unrecognized tax benefits net of unused tax attributes and payments (1)	$	812,117		$	805,487		$	327,902

(1) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $521 million, $605 million, and $522 million as of December 31, 2011, 2010, and 2009, respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3.867 billion, $4.345 billion, and $3.528 billion as of December 31, 2011, 2010, and 2009, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy has made deposits with the IRS against its potential liabilities arising from audit adjustments and settlements related to its uncertain tax positions. Deposits are expected to be made to the IRS as the cash tax benefits of uncertain tax positions are realized. As of December 31, 2011, Entergy has deposits of $363 million on account with the IRS to cover its uncertain tax positions.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31, 2011, 2010, and 2009 accrued balance for the possible payment of interest is approximately $99 million, $45 million, and $48 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2011, 2010, and 2009 is as follows:

2011	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2011	$	240,239		$	353,886		$	505,188		$	24,163		$	18,176		$	14,229		$	224,518
Additions based on tax positions related to the current year		11,216			9,398			8,748			457			50,212			1,760			44,419
Additions for tax positions of prior years		44,202			50,944			21,052			21,902			7,343			7,533			14,200
Reductions for tax positions of prior years		(3,255	)		(21,719	)		(27,991	)		(5,022	)		(12,289	)		(3,432	)		(4,942	)
Settlements		43,091			(2,016	)		(60,810	)		(30,448	)		(7,390	)		(865	)		2,988
Gross balance at December 31, 2011		335,493			390,493			446,187			11,052			56,052			19,225			281,183
Offsets to gross unrecognized tax benefits:
Loss carryovers		(146,429	)		(26,394	)		(216,720	)		(5,930	)		(1,211	)		(10,645	)		(10,752	)
Cash paid to taxing authorities		(75,977	)		(45,493	)		0			(7,556	)		(1,174	)		(1,376	)		(41,878	)
Unrecognized tax benefits net of unused tax attributes and payments	$	113,087		$	318,606		$	229,467		($	2,434	)	$	53,667		$	7,204		$	228,553

2010	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2010	$	293,920		$	311,311		$	352,577		$	17,137		($	53,295	)	$	32,299		$	211,247
Additions based on tax positions related to the current year		38,205			87,755			183,188			4,679			173			5,169			16,829
Additions for tax positions of prior years		1,838			25,960			34,236			6,857			72,169			5,868			10,402
Reductions for tax positions of prior years		(92,699	)		(71,033	)		(64,868	)		(4,469	)		(863	)		(29,100	)		(13,116	)
Settlements		(1,025	)		(107	)		55			(41	)		(8	)		(7	)		(844	)
Gross balance at December 31, 2010		240,239			353,886			505,188			24,163			18,176			14,229			224,518
Offsets to gross unrecognized tax benefits:
Loss carryovers		(123,968	)		(29,257	)		(131,805	)		(6,477	)		(3,751	)		(6,269	)		(10,487	)
Cash paid to taxing authorities		(75,977	)		(45,493	)		—			(7,556	)		(1,174	)		(1,376	)		(41,878	)
Unrecognized tax benefits net of unused tax attributes and payments	$	40,294		$	279,136		$	373,383		$	10,130		$	13,251		$	6,584		$	172,153

2009	Entergy Arkansas			Entergy Gulf States Louisiana			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2009	$	240,203		$	275,378		$	298,650		$	31,724		$	26,050		$	39,202		$	172,168
Additions based on tax positions related to the current year		9,826			5,436			10,197			283			17			97			6,812
Additions for tax positions of prior years		80,968			102,466			108,399			1,256			109			28,821			30,586
Reductions for tax positions of prior years		(22,830	)		(33,000	)		(45,613	)		(4,235	)		(70,391	)		(17,853	)		(244	)
Settlements		(14,247	)		(38,969	)		(19,056	)		(11,891	)		(9,080	)		(17,968	)		1,925
Gross balance at December 31, 2009		293,920			311,311			352,577			17,137			(53,295	)		32,299			211,247
Offsets to gross unrecognized tax benefits:
Loss carryovers		(39,847	)		(20,031	)		(70,428	)		(1,618	)		(633	)		(30,921	)		(1,297	)
Cash paid to taxing authorities		(75,977	)		(45,493	)		—			(7,556	)		(1,174	)		(1,376	)		(41,878	)
Unrecognized tax benefits net of unused tax attributes and payments	$	178,096		$	245,787		$	282,149		$	7,963		($	55,102	)	$	2		$	168,072

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would affect the effective income tax rate as follows:

	December 31, 2011		December 31, 2010		December 31, 2009
Entergy Arkansas	$	—	$	0.2	$	1.2
Entergy Gulf States Louisiana	$	107.9	$	129.6	$	69.8
Entergy Louisiana	$	281.3	$	286.7	$	192.7
Entergy Mississippi	$	3.8	$	5.3	$	3.3
Entergy New Orleans	$	—	$	—	$	0.3
Entergy Texas	$	7.3	$	6.0	$	1.2
System Energy	$	—	$	12.1	$	8.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Accrued balances for the possible payment of interest and penalties are as follows:

	December 31, 2011		December 31, 2010		December 31, 2009
	(In Millions)
Entergy Arkansas	$	11.4	$	—	$	0.7
Entergy Gulf States Louisiana	$	14.4	$	9.7	$	2.3
Entergy Louisiana	$	0.8	$	3.3	$	1.2
Entergy Mississippi	$	1.7	$	1.6	$	2.1
Entergy New Orleans	$	2.4	$	—	$	0.3
Entergy Texas	$	0.1	$	0.1	$	0.2
System Energy	$	18.5	$	8.2	$	7.2

Income Tax Litigation

In October 2010 the United States Tax Court entered a decision in favor of Entergy for tax years 1997 and 1998. The issues decided by the Tax Court are as follows:

• The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit. The U.K. Windfall Tax relates to Entergy’s former investment in London Electricity.

• The validity of Entergy’s change in method of tax accounting for street lighting assets and the related increase in depreciation deductions.

The IRS did not appeal street lighting depreciation, and that matter is considered final. The IRS filed an appeal of the U.K. Windfall Tax decision, however, with the United States Court of Appeals for the Fifth Circuit in December 2010. Oral arguments were heard in November 2011, and a decision is pending.

Concurrent with the Tax Court’s issuance of a favorable decision regarding the above issues, the Tax Court issued a favorable decision in a separate proceeding, PPL Corp. v. Commissioner, regarding the creditability of the U.K. Windfall Tax. The IRS appealed the PPL decision to the United States Court of Appeals for the Third Circuit. In December 2011, the Third Circuit reversed the Tax Court’s holding in PPL Corp. v. Commissioner, stating that the U.K. tax was not eligible for the foreign tax credit. Entergy is awaiting a decision in its proceeding before the Fifth Circuit Court of Appeals. Although Entergy believes that the Third Circuit opinion is incorrect, its decision constitutes adverse, although not controlling authority. After considering the Third Circuit decision, in the fourth quarter 2011, Entergy revised its provision for uncertain tax positions associated with this issue.

The total tax included in IRS Notices of Deficiency relating to the U.K. Windfall Tax credit issue is $82 million. The total tax and interest associated with this issue for all years is approximately $239 million. This assumes that Entergy would utilize a portion of its cash deposits discussed in “Unrecognized tax benefits” above to offset underpayment interest.

In February 2008 the IRS issued a Statutory Notice of Deficiency for the year 2000. The deficiency resulted from a disallowance of the same two 1997-1998 issues discussed above as well as one additional issue. That issue is depreciation deductions that resulted from Entergy’s purchase price allocations on its acquisitions of its non-utility nuclear plants. Entergy filed a Tax Court petition in May 2008 challenging the three issues in dispute. In June 2010 a trial on these issues was held in Washington, D.C. In February 2011 a joint stipulation of settled issues was filed addressing the depreciation issue in the Tax Court case. As a result, the IRS agreed that Entergy was entitled to allocate all of the cash consideration to plant and equipment rather than to nuclear decommissioning trusts thereby entitling Entergy to its claimed depreciation.

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns. Other than the matters discussed in the Income Tax Litigation section above, the IRS’s and substantially all state taxing authorities’ examinations are completed for years before 2004.

2002-2003 IRS Audit

In September 2009, Entergy entered into a partial agreement with the IRS for the years 2002 and 2003. It is a partial agreement because Entergy did not agree to the IRS’s disallowance of foreign tax credits for the U.K. Windfall Tax and the street lighting depreciation issues as they relate to 2002. As discussed above the, the IRS did not appeal the Tax Court ruling on the street lighting depreciation. Therefore, the U.K. Windfall tax credit issue will be governed by the decision by the Fifth Circuit Court of Appeals for the tax years 1997 and 1998.

2004-2005 IRS Audit

The IRS issued its 2004-2005 Revenue Agent’s Report (RAR) in May 2009.

In June 2009, Entergy filed a formal protest with the IRS Appeals Division indicating disagreement with certain issues contained in the 2004-2005 RAR. The major issues in dispute are:

• Depreciation of street lighting assets (Because the IRS did not appeal the Tax Court’s 2010 decision on this issue, it will be fully allowed in the final Appeals Division calculations for this audit).

• Qualified research expenditures for purposes of the research credit.

• Inclusion of nuclear decommissioning liabilities in cost of goods sold.

The initial IRS appeals conference to discuss these disputed issues occurred in September 2010. Negotiations are ongoing.

2006-2007 IRS Audit

The IRS issued its 2006-2007 RAR in October 2011. In connection with the 2006-2007 IRS audit and resulting RAR, Entergy resolved the significant issues discussed below.

In August 2011, Entergy entered into a settlement agreement with the IRS relating to the mark-to-market income tax treatment of various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility. See Note 8 to the financial statements for further details regarding this contract and a previous LPSC-approved settlement regarding sharing of tax benefits from the tax treatment of the contract.

With respect to income tax accounting for wholesale electric power purchase agreements, Entergy recognized income for tax purposes of approximately $1.5 billion, which represents a reversal of previously deducted temporary differences on which deferred taxes had been provided. Also in connection with this settlement, Entergy recognized a gain for income tax purposes of approximately $1.03 billion on the formation of a wholly-owned subsidiary in 2005 with a corresponding step-up in the tax basis of depreciable assets resulting in additional tax depreciation at Entergy Louisiana. Because Entergy Louisiana is entitled to deduct additional tax depreciation of $1.03 billion in the future, Entergy Louisiana recorded a deferred tax asset for this additional tax basis. The tax expense associated with the gain is offset by recording the deferred tax asset and by utilization of net operating losses. With the recording of the deferred tax asset, there was a corresponding increase to Entergy Louisiana’s member’s equity account. The agreement with the IRS effectively settled the tax treatment of various wholesale electric power purchase and sale agreements, resulting in the reversal in third quarter 2011 of approximately $422 million of deferred tax liabilities and liabilities for uncertain tax positions at Entergy Louisiana, with a corresponding reduction in income tax expense. Under the terms of an LPSC-approved final settlement, Entergy Louisiana will share over a 15-year period a portion of the benefits of the settlement with its customers, and recorded a $199 million regulatory charge and a corresponding net-of-tax regulatory liability to reflect this obligation.

After consideration of the taxable income recognition and the additional depreciation deductions provided for in the settlement, Entergy’s net operating loss carryover was reduced by approximately $2.5 billion.

Other Tax Matters

Entergy regularly negotiates with the IRS to achieve settlements. The results of all pending litigations and audit issues could result in significant changes to the amounts of unrecognized tax benefits, as discussed above.

When Entergy Louisiana, Inc. restructured effective December 31, 2005, Entergy Louisiana agreed, under the terms of the merger plan, to indemnify its parent, Entergy Louisiana Holdings, Inc. (formerly, Entergy Louisiana, Inc.) for certain tax obligations that arose from the 2002-2003 IRS partial agreement. Because the agreement with the IRS was settled in the fourth quarter 2009, Entergy Louisiana paid Entergy Louisiana Holdings approximately $289 million pursuant to these intercompany obligations in the fourth quarter 2009.

On November 20, 2009, Entergy Corporation and subsidiaries amended the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement such that Entergy Corporation shall be treated, under all provisions of such Agreement, in a manner that is identical to the treatment afforded all subsidiaries, direct or indirect, of Entergy Corporation.

In the fourth quarter 2009, Entergy filed Applications for Change in Method of Accounting with the IRS for certain costs under Section 263A of the Internal Revenue Code. In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold. The effect of this change for Entergy was a $5.7 billion reduction in 2009 taxable income within the Entergy Wholesale Commodities segment.

In March 2010, Entergy filed an Application for Change in Accounting Method with the IRS. In the application Entergy proposed to change the definition of unit of property for its generation assets to determine the appropriate characterization of costs associated with such units as capital or repair under the Internal Revenue Code and related Treasury Regulations. The effect of this change was an approximate $1.3 billion reduction in 2010 taxable income for Entergy, including reductions of $292 million for Entergy Arkansas, $132 million for Entergy Gulf States Louisiana, $185 million for Entergy Louisiana, $48 million for Entergy Mississippi, $45 million for Entergy Texas, $13 million for Entergy New Orleans, and $180 million for System Energy.

During the second quarter 2011, Entergy filed an Application for Change in Accounting Method with the IRS related to the allocation of overhead costs between production and non-production activities. The accounting method affects the amount of overhead that will be capitalized or deducted for tax purposes. The accounting method is expected to be implemented for the 2014 tax year.