APS 2012 Annual Report Download - page 192

ARIZONA PUBLIC SERVICE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
167
Year Ended December 31,
2012
2011
2010
Federal income tax expense at 35%
statutory rate
$ 235,027
$ 194,710
$ 184,202
Increases (reductions) in tax expense
resulting from:
State income tax net of federal income
tax benefit
25,379
21,139
19,186
Credits and favorable adjustments related
to prior years resolved in current year
--
--
(17,300)
Medicare Subsidy Part-D
483
823
889
Allowance for equity funds used during
construction (see Note 1)
(6,158)
(6,880)
(6,563)
Palo Verde VIE noncontrolling interest
(see Note 20)
(11,065)
(9,633)
(7,057)
Other
730
(7,617)
(2,892)
Income tax expense
$ 244,396
$ 192,542
$ 170,465
The following table shows the net deferred income tax liability recognized on the APS
Balance Sheets (dollars in thousands):
December 31,
2012
2011
Current asset
$ 74,420
$ 111,503
Long-term liability
(2,133,976)
(1,952,608)
Deferred income taxes – net
$ (2,059,556)
$ (1,841,105)
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 $4 million in federal general business income tax credit carryforwards
which are classified as current assets as of December 31, 2012.