Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the amount of unrecognized tax benefit is as follows:



(Millions of Dollars)	Dec. 31, 2014		Dec. 31, 2013
Unrecognized tax benefit — Permanent tax positions	$	1.5	$	1.2
Unrecognized tax benefit — Temporary tax positions	11.7		2.9
Total unrecognized tax benefit	$	13.2	$	4.1

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



(Millions of Dollars)	2014			2013			2012
Balance at Jan. 1	$	4.1		$	3.9		$	4.8
Additions based on tax positions related to the current year	8.6			1.6			1.1
Reductions based on tax positions related to the current year	—			—			(1.6		)
Additions for tax positions of prior years	2.3			3.1			0.8
Reductions for tax positions of prior years	(0.3		)	(0.3		)	(1.2		)
Settlements with taxing authorities	(0.2		)	(4.2		)	—
Lapse of applicable statutes of limitations	(1.3		)	—			—
Balance at Dec. 31	$	13.2		$	4.1		$	3.9

Tax Benefits Associated with NOL and Tax Credit Carryforwards

The unrecognized tax benefit amounts were reduced by the tax benefits associated with NOL and tax credit carryforwards. The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:



(Millions of Dollars)	Dec. 31, 2014			Dec. 31, 2013
NOL and tax credit carryforwards	$	(4.8	)	$	(2.4	)

NOL and Tax Credit Carryforwards

Other Income Tax Matters — NOL amounts represent the amount of the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31 were as follows:



(Millions of Dollars)	2014		2013
Federal NOL carryforward	$	192.4	$	168.7
Federal tax credit carryforwards	2.1		1.7
State NOL carryforwards	58.5		23.6

Schedule of Effective Income Tax Rate Reconciliation

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The following reconciles such differences for the years ending Dec. 31:



	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
Increases (decreases) in tax from:
State income taxes, net of federal income tax benefit	3.4		2.0		2.2
Change in unrecognized tax benefits	0.2		0.7		—
Regulatory differences — utility plant items	(1.6	)	(1.1	)	(0.4	)
Tax credits recognized	(0.4	)	(0.4	)	(0.2	)
Other, net	0.1		(0.1	)	0.3
Effective income tax rate	36.7	%	36.1	%	36.9	%

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2014			2013			2012
Current federal tax expense (benefit)	$	(57,201	)	$	14,947		$	6,549
Current state tax expense	2,512			2,943			2,712
Current change in unrecognized tax benefit	6,715			(263		)	(824		)
Deferred federal tax expense	121,882			33,489			50,189
Deferred state tax expense	8,025			1,754			3,069
Deferred change in unrecognized tax (benefits) expense	(6,390		)	1,232			861
Deferred investment tax credits	(341		)	(341		)	(327		)
Total income tax expense	$	75,202		$	53,761		$	62,229

The components of deferred income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2014			2013			2012
Deferred tax expense excluding items below	$	124,875		$	38,333		$	55,749
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	(1,262		)	(1,761		)	(1,533		)
Tax expense allocated to other comprehensive income	(96		)	(97		)	(97		)
Deferred tax expense	$	123,517		$	36,475		$	54,119

Schedule of Deferred Tax Assets and Liabilities

The components of the net deferred tax liability (current and noncurrent) at Dec. 31 were as follows:



(Thousands of Dollars)	2014		2013
Deferred tax liabilities:
Differences between book and tax bases of property	$	842,847	$	705,416
Employee benefits	50,696		52,081
Other	28,591		30,066
Total deferred tax liabilities	$	922,134	$	787,563
Deferred tax assets:
NOL carryforward	$	71,956	$	61,330
Rate refund	18,405		17,192
Unbilled revenue - fuel costs	10,866		13,316
Regulatory liabilities	10,794		9,724
Deferred fuel costs	6,006		6,877
Other	6,816		6,708
Total deferred tax assets	$	124,843	$	115,147
Net deferred tax liability	$	797,291	$	672,416

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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