INCOME TAXES

We calculate our interim period provision for income taxes based on our projected annual effective tax rate as adjusted for certain discrete items.

The table below shows our effective tax rates attributable to continuing operations:



	Three Months Ended September 30				Nine Months Ended September 30
	2013		2012		2013		2012
Effective Tax Rate	31.4	%	28.5	%	36.3	%	32.2	%

Our effective tax rate normally differs from the federal statutory tax rate of 35% due to additional provision for multistate income tax obligations. Other significant items that had an impact on our effective tax rates are noted below.

Our effective tax rate for the three months ended September 30, 2013, was lower than the federal statutory tax rate of 35%. This difference was primarily due to a $3.7 million decrease in our provision for income taxes due to the reversal of a regulatory liability. This amount was related to deferred income taxes that had been recorded in prior years as a result of scheduled income tax rate changes in Illinois. We recorded the reversal based on the income tax treatment included in the 2013 final rate order for PGL and NSG.

Our effective tax rate for the three months ended September 30, 2012, was lower than the federal statutory tax rate of 35%. This difference was partially due to a $5.9 million decrease in the provision for income taxes resulting from WPS's 2013 rate case settlement agreement. In the third quarter of 2012, WPS recorded a regulatory asset after the settlement agreement authorized recovery of deferred income taxes expensed in previous years in connection with the 2010 federal health care reform. See Note 21, "Regulatory Environment," for more information. Our effective tax rate was also impacted by the federal income tax benefit of tax credits related to wind production and other miscellaneous tax adjustments.

Our effective tax rate for the nine months ended September 30, 2012, was lower than the federal statutory tax rate of 35%. This difference was partially due to the settlement of certain state income tax examinations and the remeasurement of uncertain tax positions included in our liability for unrecognized tax benefits in 2012. We decreased our provision for income taxes $6.2 million in 2012 primarily related to these items. In addition, our provision for income taxes decreased $5.9 million in 2012 related to the impact of WPS's 2013 rate case settlement agreement, as described above. Our effective tax rate was also impacted by the federal income tax benefit of tax credits related to wind production.

During the three months ended September 30, 2013, there was not a significant change in our liability for unrecognized tax benefits. During the nine months ended September 30, 2013, we decreased our liability for unrecognized tax benefits by $7.7 million. This decrease primarily related to remeasurements of uncertain tax positions driven by an effective settlement of certain state income tax examinations. We reduced the provision for income taxes related to these remeasurements, of which the majority was reported as discontinued operations.