APS 2012 Annual Report Download - page 129

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
The following chart compares pretax income from continuing operations at the 35% federal
income tax rate to income tax expense – continuing operations (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Federal income tax expense at 35%
statutory rate
$ 229,709
$ 188,733
$ 177,002
Increases (reductions) in tax expense
resulting from:
State income tax net of federal income
tax benefit
23,819
19,594
17,485
Credits and favorable adjustments
related to prior years resolved in
current year
--
--
(17,300)
Medicare Subsidy Part-D
483
823
1,311
Allowance for equity funds used during
construction (see Note 1)
(6,158)
(6,881)
(6,563)
Palo Verde VIE noncontrolling interest
(see Note 20)
(11,065)
(9,636)
(7,057)
Other
529
(9,029)
(4,009)
Income tax expense – continuing operations
$ 237,317
$ 183,604
$ 160,869
The following table shows the net deferred income tax liability recognized on the Consolidated
Balance Sheets (dollars in thousands):
December 31,
2012
2011
Current asset
$ 152,191
$ 130,571
Long-term liability
(2,151,371)
(1,925,388)
Deferred income taxes – net
$ (1,999,180)
$ (1,794,817)
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 has 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. As of December 31, 2012, APS has recorded a regulatory liability of
$69 million, with a corresponding decrease in accumulated deferred income tax liabilities, to reflect the
impact of this change in tax law.
The American Taxpayer Relief Act of 2012, signed into law on January 2, 2013, includes
provisions making qualified property placed into service in 2013 eligible for 50% bonus depreciation
for federal income tax purposes. Full recognition of the cash benefit of this provision would delay
realization of approximately $79 million in federal general business income tax credit carryforwards
which are classified as current assets as of December 31, 2012.