(8) Income Taxes

Income tax expense (benefit) consists of the following for the years ended December 31 (in millions):



	2014			2013			2012

Current:
Federal	$	2		$	54		$	(112	)
State	10			13			(3		)
Total	12			67			(115		)

Deferred:
Federal	260			204			283
State	43			29			33
Total	303			233			316

Investment tax credits	(6		)	(3		)	(4		)
Total income tax expense	$	309		$	297		$	197

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:



	2014		2013		2012

Federal statutory income tax rate	35	%	35	%	35	%
State income taxes, net of federal income tax benefit	3		3		3
Federal income tax credits⁽¹⁾	(7	)	(7	)	(9	)
Other	—		(1	)	(2	)
Effective income tax rate	31	%	30	%	27	%


(1)	Primarily attributable to the impact of federal renewable electricity production tax credits for qualifying wind-powered generating facilities that extend 10 years from the date the facilities were placed in-service.

The net deferred income tax liability consists of the following as of December 31 (in millions):



	2014			2013

Deferred income tax assets:
Regulatory liabilities	$	362		$	355
Employee benefits	184			98
Derivative contracts and unamortized contract values	79			76
State carryforwards	68			68
Loss contingencies	70			67
Asset retirement obligations	47			48
Other	92			86
	902			798
Deferred income tax liabilities:
Property, plant and equipment	(4,780		)	(4,528		)
Regulatory assets	(647		)	(525		)
Other	(56		)	(38		)
	(5,483		)	(5,091		)
Net deferred income tax liability	$	(4,581	)	$	(4,293	)

Reflected as:
Deferred income taxes - current assets	$	28		$	66
Deferred income taxes - noncurrent liabilities	(4,609		)	(4,359		)
	$	(4,581	)	$	(4,293	)

The following table provides PacifiCorp's net operating loss and tax credit carryforwards and expiration dates as of December 31, 2014 (in millions):



	State

Net operating loss carryforwards	$	1,417
Deferred income taxes on net operating loss carryforwards	$	52
Expiration dates	2015 - 2032

Tax credit carryforwards	$	16
Expiration dates	2015 - indefinite

The United States Internal Revenue Service has effectively settled its examination of PacifiCorp's income tax returns through December 31, 2009. State agencies have closed their examinations of PacifiCorp's income tax returns through March 31, 2006, except for the December 31,1995 and 1997 tax years in Utah and the March 31, 2004, 2005 and 2006 tax years in Colorado and Utah.

As of December 31, 2014 and 2013, PacifiCorp had unrecognized tax benefits totaling $14 million and $13 million, respectively, related to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits, other than applicable interest and penalties, would not affect PacifiCorp's effective income tax rate.