Income Taxes

The components of income tax expense were:



	2012		2011		2010
Current:
Federal	$	—	(4,894	)	3,738
State	3,305		3,002		4,925
Deferred:
Federal	12,114		16,560		10,694
State	123		(102	)	(2,617	)
	$	15,542	14,566		16,740

The following table reconciles income tax expense to the amount computed by applying the federal statutory rate to income before income taxes of $37,860, $35,444 and $41,146 in 2012, 2011 and 2010:



	2012			2011		2010
“Expected” federal income tax	$	13,251		12,405		14,026
Increase (decrease) in taxes attributable to:
State taxes, net of federal income tax benefit	2,108			1,934		2,397
Dividend received deduction	(59		)	(58	)	(282	)
Other items, net	242			285		599
	$	15,542		14,566		16,740

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



	2012		2011
Deferred tax assets:
Advances and contributions	$	15,214	14,954
Unamortized investment tax credit	773		805
Pensions and postretirement benefits	4,757		4,644
California franchise tax	1,193		1,429
Net operating loss	6,439		2,495
Other	1,272		1,181
Total deferred tax assets	$	29,648	25,508
Deferred tax liabilities:
Utility plant	$	110,983	96,349
Pension and postretirement benefits	46,315		43,199
Investment in stock	2,487		2,488
Deferred gain and other-property related	14,440		15,287
Debt reacquisition costs	545		595
Other	2,457		1,131
Total deferred tax liabilities	$	177,227	159,049
Net deferred tax liabilities	$	147,579	133,541

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, 2012, the Company has a federal net operating loss carry forward of $18,397, 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 $2,130 and $1,874 as of December 31, 2012 and 2011, 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 $109 and $61 as of December 31, 2012 and 2011, respectively.

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



Balance at December 31, 2011	$	1,978
Additions based on tax position related to the current year, including interest	546
Reductions related to tax positions taken in a prior year, including interest	(208		)
Balance at December 31, 2012	$	2,316

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 $109 as of December 31, 2012. SJW Corp. has not accrued any penalties for unrecognized tax benefits.

SJW Corp. anticipates that its unrecognized tax benefits balance will be reduced by approximately $12 within the next 12 months following December 31, 2012 due to lapsing statutes of limitations. Through December 31, 2012, since the adoption of FASB ASC Topic 740—“Income Taxes”, a cumulative reduction of $1,455 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, 2009, 2010 and 2011. 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 - 2011
California	2008 - 2011
Arizona	2008 - 2011
Connecticut	2009 - 2011
Florida	2009 - 2011
Tennessee	2009 - 2011
Texas	2008 - 2011