APS 2012 Annual Report Download - page 190

ARIZONA PUBLIC SERVICE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
165
2012
2011
2010
Total unrecognized tax benefits, January 1
$ 135,824
$ 126,698
$ 199,887
Additions for tax positions of the current
year
5,167
10,915
7,551
Reductions for tax positions of prior years
for:
Changes in judgment
(7,729)
(1,555)
(10,964)
Settlements with taxing authorities
--
(124)
(61,820)
Lapses of applicable statute of
limitations
(21) (110) (7,956)
Total unrecognized tax benefits,
December 31
$ 133,241 $ 135,824 $ 126,698
Included in the balance of unrecognized tax benefits at December 31, 2012, 2011 and 2010
were approximately $10 million, $8 million and $6 million, respectively, of tax positions that, if
recognized, would decrease our effective tax rate.
As of the balance sheet date, the tax year ended December 31, 2008 and all subsequent tax
years remain subject to examination by the IRS. With few exceptions, we are no longer subject to
state income tax examinations by tax authorities for years before 2008.
It is reasonably possible that within the next twelve months the IRS will finalize the
examination of tax returns for the years ended December 31, 2008 and 2009. At this time, a
reasonable estimate of the range of possible change in the uncertain tax position cannot be made.
However, we do not expect the ultimate outcome of this examination to have a material adverse
impact on our financial position or results of operations.
We reflect interest and penalties, if any, on unrecognized tax benefits in the Statements of
Income as income tax expense. The amount of interest recognized in the Statements of Income
related to unrecognized tax benefits was a pre-tax expense of $4 million for 2012, a pre-tax expense
of $3 million for 2011 and a pre-tax benefit of $2 million for 2010.
The total amount of accrued liabilities for interest recognized in the Balance Sheets related to
unrecognized tax benefits was $13 million as of December 31, 2012, $9 million as of December 31,
2011 and $6 million as of December 31, 2010. To the extent that matters are settled favorably, this
amount could reverse and decrease our effective tax rate. Additionally, as of December 31, 2012, we
have recognized $5 million of interest income to be received on the overpayment of income taxes for
certain adjustments that we have filed, or will file, with the IRS.
The components of APS’s income tax expense are as follows (dollars in thousands):