Income Taxes

The components of income tax expense were:



	2011			2010		2009
Current:
Federal	$	(4,894	)	3,738		717
State	3,002			4,925		3,258
Deferred:
Federal	16,560			10,694		7,140
State	(102		)	(2,617	)	(835	)
	$	14,566		16,740		10,280

The following table reconciles income tax expense to the amount computed by applying the federal statutory rate to income before income taxes of $35,444, $41,146 and $25,451 in 2011, 2010 and 2009:



	2011			2010		2009
“Expected” federal income tax	$	12,405		14,026		8,653
Increase (decrease) in taxes attributable to:
State taxes, net of federal income tax benefit	1,934			2,397		1,710
Dividend received deduction	(58		)	(282	)	(309	)
Other items, net	285			599		226
	$	14,566		16,740		10,280

The components of the net deferred tax liability as of December 31 was as follows:



	2011		2010
Deferred tax assets:
Advances and contributions	$	14,954	15,311
Unamortized investment tax credit	805		837
Pensions and postretirement benefits	4,644		4,665
California franchise tax	1,429		774
Net operating loss	2,495		—
Other	1,181		1,053
Total deferred tax assets	$	25,508	22,640
Deferred tax liabilities:
Utility plant	$	96,349	79,532
Pension and postretirement benefits	43,199		30,200
Investment in stock	2,488		2,548
Deferred gain and other-property related	15,287		15,212
Debt reacquisition costs	595		644
Other	1,131		910
Total deferred tax liabilities	$	159,049	129,046
Net deferred tax liabilities	$	133,541	106,406

Management evaluates the realizability of our deferred tax assets based on all available evidence, both positive and negative. The realization of deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods in which the deferred tax assets are expected to reverse. Based on all available evidence, management believes it is more likely than not that SJW Corp. will realize the benefits of these deferred tax assets.

As of December 31, 2011, the Company has a federal net operating loss carry forward of $7,129, which will expire in fiscal year 2031.

The total amount of unrecognized tax benefits, before the impact of deductions for state taxes, excluding interest and penalties was $1,874 and $1,166 as of December 31, 2011 and 2010, respectively. The amount of tax benefits, net of any federal benefits for state taxes and inclusive of interest that would impact the effective rate, if recognized, is approximately $61 and $615 as of December 31, 2011 and 2010, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



Balance at December 31, 2010	$	1,254
Additions based on tax position related to the current year, including interest	997
Reductions related to tax positions taken in a prior year, including interest	(273		)
Balance at December 31, 2011	$	1,978

SJW Corp.’s policy is to classify interest and penalties associated with unrecognized tax benefits, if any, in tax expense. Accrued interest expense, net of the benefit of tax deductions which would be available on the payment of such interest, is approximately $61 as of December 31, 2011. SJW Corp. has not accrued any penalties for unrecognized tax benefits.

SJW Corp. anticipates that its unrecognized tax benefits balance will change within the next 12 months following December 31, 2011 due to lapsing statutes of limitations. This change is not expected to be material to the consolidated financial statements. Through December 31, 2011, since the adoption of FASB ASC Topic 740—“Income Taxes”, a cumulative reduction of $1,247 was recorded to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations.

The Company is currently undergoing an income tax examination by the Internal Revenue Service for its fiscal years 2008 and 2009. While management believes that the Company has adequately provided for all tax positions, amounts asserted by tax authorities could be greater or less than the Company's current position. Accordingly, the Company's provisions on federal tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved. The Company does not expect its unrecognized tax benefits to change materially over the next 12 months.

SJW Corp. files U.S. federal income tax returns and income tax returns in various states. The open tax years for the jurisdictions in which SJW Corp. files are as follows:



Jurisdiction	Years Open
Federal	2008 - 2010
California	2007 - 2010
Arizona	2007 - 2010
Connecticut	2008 - 2010
Florida	2008 - 2010
Tennessee	2008 - 2010
Texas	2007 - 2010