Income Taxes And Other Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes And Other Taxes

16. Income Taxes and Other Taxes

Income Taxes. Duke Energy and its subsidiaries file income tax returns in the U.S. with federal and various state governmental authorities, and in certain foreign jurisdictions. The taxable income of Duke Energy and its subsidiaries is reflected in Duke Energy's U.S. federal and state income tax returns. These subsidiaries have a tax sharing agreement with Duke Energy where the separate return method is used to allocate tax expenses and benefits to the subsidiaries whose investments or results of operations provide these tax expenses and benefits. The accounting for income taxes essentially represents the income taxes that each of these subsidiaries would incur if it were a separate company filing its own tax return as a C-Corporation.

The effective tax rates for each of the Duke Energy Registrants are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Duke Energy	32.2	%	30.4	%	29.8	%	30.8	%
Duke Energy Carolinas	37.2	%	35.5	%	36.7	%	35.3	%
Duke Energy Ohio	39.9	%	9.6	%	38.1	%	30.4	%
Duke Energy Indiana	34.4	%	29.3	%	45.7	%	32.3	%

For the three months ended June 30, 2012, Duke Energy's effective tax rate increased primarily due to a $10 million reduction of deferred tax liabilities as a result of an election related to the transfer of certain gas fired generation assets to its wholly owned subsidiary Duke Energy Commercial Asset Management, LLC (DECAM) in the second quarter of 2011. For the six months ended June 30, 2012, Duke Energy reflected a decrease in its effective tax rate primarily due to a decrease in pretax income related to the Edwardsport IGCC project impairment charges.

In addition, for the three and six months ended June 30, 2012, Duke Energy Carolinas reflected an increase in its effective tax rate primarily due to a decrease in AFUDC equity, Duke Energy Ohio's effective tax rate increased primarily due to an increase in pretax income and a $10 million reduction of deferred tax liabilities as a result of an election related to the transfer of certain gas-fired generation assets to its wholly owned subsidiary DECAM in the second quarter of 2011, and Duke Energy Indiana reflected an increase in its effective tax rate primarily due to an increase in pretax loss related to the Edwardsport IGCC project impairment charges. See Note 4 for further details on the impairment charges.

Excise Taxes. Certain excise taxes levied by state or local governments are collected by the Duke Energy Registrants from its customers. These taxes, which are required to be paid regardless of the Duke Energy Registrants' ability to collect from the customer, are accounted for on a gross basis. When each of the Duke Energy Registrants act as an agent, and the tax is not required to be remitted if it is not collected from the customer, the taxes are accounted for on a net basis. Excise taxes for each Duke Energy Registrant are accounted for on a gross basis and recorded as revenues and other tax expensein therespective Condensed Consolidated Statements of Operations were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2012		2011		2012		2011
Duke Energy Carolinas	$	39	$	37	$	78	$	73
Duke Energy Ohio		23		25		53		59
Duke Energy Indiana		8		7		16		15
Duke Energy	$	70	$	69	$	147	$	147