APS 2011 Annual Report Download - page 189

ARIZONA PUBLIC SERVICE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
164
Year Ended December 31,
2011 2010 2009
Federal income tax expense at 35%
statutory rate $ 194,710 $ 184,202 $ 148,053
Increases (reductions) in tax expense
resulting from:
State income tax net of federal income
tax benefit 21,139 19,186 16,691
Credits and favorable adjustments related
to prior years resolved in current year -- (17,300) --
Medicare Subsidy Part-D 823 889 (2,025)
Allowance for equity funds used during
construction (see Note 1) (6,880) (6,563) (4,265)
Palo Verde VIE noncontrolling interest
(see Note 20)
(9,633) (7,057) (6,723)
Other (7,617) (2,892) 843
Income tax expense $ 192,542 $ 170,465 $ 152,574
The following table shows the net deferred income tax liability recognized on the APS
Balance Sheets (dollars in thousands):
December 31,
2011 2010
Current asset $ 111,503 $ 105,042
Long-term liability (1,952,608) (1,895,654)
Deferred income taxes – net $ (1,841,105) $ (1,790,612)
On February 17, 2011, Arizona enacted legislation (H.B. 2001) that included a four year
phase-in of corporate income tax rate reductions beginning in 2014. As a result of these tax rate
reductions, Pinnacle West revised the tax rate applicable to reversing temporary items in Arizona. In
accordance with accounting for regulated companies, the benefit of this rate reduction is substantially
offset by a regulatory liability. In 2011, APS increased regulatory liabilities by a total of $62 million,
with a corresponding decrease in accumulated deferred income tax liabilities to reflect the impact of
this change in tax law.