12. Income Taxes

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure Abstract

12. Income Taxes

12. Income Taxes

The components of income tax expense from continuing operations for 2012, 2011 and 2010 were as follows:

Reconciliations of the provision for income taxes computed at the statutory rate to the reported provisions for income taxes from continuing operations for 2012, 2011 and 2010 are set forth below:

			2012		2011		2010
			(In thousands)
Tax at statutory rate of 35%		$	101,648	$	103,743	$	108,169
Common stock dividends deductible
	for tax reporting		(2,096)		(1,930)		(1,785)
Penalties			66		2,292		104
Recognition (settlement) of uncertain tax positions			1,831		(4,950)		-
State taxes (net of federal benefit)			(5,958)		8,109		11,493
Other, net			2,735		(445)		1,222
Income tax expense		$	98,226	$	106,819	$	119,203

Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that gave rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 2012 and 2011 are presented below:

				2012		2011
				(In thousands)
Deferred tax assets:
	Accruals not currently deductible for tax purposes		$	7,906	$	10,327
	Customer advances			4,721		5,271
	Nonqualified benefit plans			48,513		43,924
	Postretirement benefits			62,802		62,274
	Treasury lock agreements			25,448		20,060
	Unamortized investment tax credit			14		120
	Tax net operating loss and credit carryforwards			164,419		95,293
	Difference between book and tax on mark to market
		accounting		2,342		8,039
	Other, net			7,223		3,529
		Total deferred tax assets		323,388		248,837
Deferred tax liabilities:
	Difference in net book value and net tax value
		of assets		(1,254,698)		(1,108,063)
	Pension funding			(32,812)		(7,533)
	Gas cost adjustments			(21,806)		(13,570)
	Cost expensed for tax purposes and capitalized for book
		purposes		(2,065)		(3,039)
		Total deferred tax liabilities		(1,311,381)		(1,132,205)
Net deferred tax liabilities			$	(987,993)	$	(883,368)
Deferred credits for rate regulated entities			$	140	$	325

At September 30, 2012, we had $10.1 million of federal alternative minimum tax credit carryforwards, $143.2 million of federal net operating loss carryforwards, $10.6 million of state net operating loss carryforwards and $0.5 million of state tax credits. The alternative minimum tax credit carryforwards do not expire. The federal net operating loss carryforwards are available to offset taxable income and will begin to expire in 2029. Depending on the jurisdiction in which the state net operating loss was generated, the state net operating loss carryforwards will begin to expire between 2016 and 2030. The state tax credits will begin to expire in 2018.

At September 30, 2012, we had recorded liabilities associated with uncertain tax positions totaling $1.8 million. The realization of these tax benefits would reduce our income tax expense by approximately $1.8 million.

Additionally, results for fiscal 2012 were favorably impacted by a state tax benefit of $13.6 million.  Due to the completion of the sale of our Missouri, Iowa and Illinois service areas in the fiscal fourth quarter, the Company updated its analysis of the tax rate at which deferred taxes would reverse in the future to reflect the sale of these service areas.  The updated analysis supported a reduction in the deferred tax rate which when applied to the balance of taxable income deferred to future periods resulted in a reduction of the Company's overall deferred tax liability.

At September 30, 2010, we had accrued liabilities associated with uncertain tax positions totaling $6.7 million. During the fiscal year ended September 30, 2011, the IRS completed its audit of fiscal years 2005-2007. All uncertain tax positions were effectively settled upon completion of the audit. As a result of the settlement, we reduced our unrecognized tax benefits by $6.7 million in the second quarter of fiscal 2011. Income tax expense was reduced by $5.0 million in the second quarter due to the realization of the tax positions which were previously uncertain.

We recognize accrued interest related to unrecognized tax benefits as a component of interest expense. We recognize penalties related to unrecognized tax benefits as a component of miscellaneous income (expense) in accordance with regulatory requirements. We recognized a tax expense of $0.01 million, $0.01 million and $0.5 million related to penalty and interest expenses during the fiscal years ended September 30, 2012,2011and 2010.

We file income tax returns in the U.S. federal jurisdiction as well as in various states where we have operations. We have concluded substantially all U.S. federal income tax matters through fiscal year 2007.