APS 2013 Annual Report Download - page 169

Table of Contents
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax (see Note 19). As a result, there is no income tax expense
associated with the VIEs recorded on APS’s Consolidated Statements of Income.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, at the beginning and end
of the year that are included in accrued taxes and unrecognized tax benefits (dollars in thousands):
2013 2012 2011
Total unrecognized tax benefits, January 1 $133,241 $ 135,824 $ 126,698
Additions for tax positions of the current year 3,516 5,167 10,915
Additions for tax positions of prior years 13,158 — —
Reductions for tax positions of prior years for:
Changes in judgment (107,918) (7,729)(1,555)
Settlements with taxing authorities — — (124)
Lapses of applicable statute of limitations —(21)(110)
Total unrecognized tax benefits, December 31 $41,997 $133,241 $ 135,824
Included in the balance of unrecognized tax benefits at December 31, 2013, 2012 and 2011 were approximately $10 million, $10 million and $8
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, 2010 and all subsequent tax years remain subject to examination by the IRS. With a
few exceptions, we are no longer subject to state income tax examinations by tax authorities for years before 2010.
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 benefit of $4 million for 2013, a pre-tax expense of $4 million for 2012
and a pre-tax expense of $3 million for 2011.
The total amount of accrued liabilities for interest recognized in the Balance Sheets related to unrecognized tax benefits was less than $1 million as of
December 31, 2013, $13 million as of December 31, 2012 and $9 million as of December 31, 2011. To the extent that matters are settled favorably, this
amount could be reversed and decrease our effective tax rate. Additionally, as of December 31, 2013, 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.
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