Energy Transfer 2012 Annual Report Download - page 187

F - 42
The following table sets forth the changes in unrecognized tax benefits:
Years Ended December 31,
2012 2011 2010
Balance at beginning of year $ 2 $ 2 $ 1
Additions attributable to acquisitions 28 — —
Additions attributable to tax positions taken in the current year — 1 —
Additions attributable to tax positions taken in prior years — — 1
Settlements — (1) —
Lapse of statute (3) — —
Balance at end of year $ 27 $ 2 $ 2
As of December 31, 2012, we have $24 million ($16 million after federal income tax benefits) related to tax positions which,
if recognized, would impact our effective tax rate. We believe it is reasonably possible that its unrecognized tax benefits may
be reduced by $5 million ($3 million, net of federal tax) within the next twelve months due to settlement of certain positions.
Our policy is to accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income
tax expense. During 2012, we recognized interest and penalties of less than $1 million. At December 31, 2012, we have
interest and penalties accrued of $5 million, net of tax.
In general, ETP and its subsidiaries are no longer subject to examination by the Internal Revenue Service for tax years prior
to 2009, except Sunoco and Southern Union which are no longer subject to examination by the IRS for tax years prior to 2007
and 2004, respectively.
Sunoco has been examined by the IRS for the 2007 and 2008 tax years, however, the statutes remain open for both of these
tax years due to carryback of net operating losses. Southern Union is under examination for the tax years 2004 through 2009.
As of December 31, 2012, the IRS has proposed only one adjustment for the years under examination. For the 2006 tax year,
the IRS is challenging $545 million of the $690 million of deferred gain associated with a like kind exchange involving certain
assets of its distribution operations and its gathering and processing operations. We will vigorously defend and believe Southern
Union's tax position will prevail against this challenge by the IRS. Accordingly, no unrecognized tax benefit has been recorded
with respect to this tax position.
ETP and its subsidiaries also have various state and local income tax returns in the process of examination or administrative
appeal in various jurisdictions. We believe the appropriate accruals or unrecognized tax benefits have been recorded for any
potential assessment with respect to these examinations.
10. REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES:
Southern Union and its Subsidiaries
The FERC is currently conducting an audit of PEPL, a subsidiary of Southern Union, to evaluate its compliance with the
Uniform System of Accounts as prescribed by the FERC, annual and quarterly financial reporting to the FERC, reservation
charge crediting policy and record retention. The audit is related to the period from January 1, 2010 through December 31,
2011 and is pending the issuance of a draft audit report.
Contingent Matters Potentially Impacting the Partnership from Our Investment in Citrus
Florida Gas Pipeline Relocation Costs. The Florida Department of Transportation, Florida's Turnpike Enterprise ("FDOT/
FTE") has various turnpike/State Road 91 widening projects that have impacted or may, over time, impact one or more of
FGTs' mainline pipelines located in FDOT/FTE rights-of-way. Several FDOT/FTE projects are the subject of litigation in
Broward County, Florida. On January 27, 2011, a jury awarded FGT $83 million and rejected all damage claims by the FDOT/
FTE. On May 2, 2011, the judge issued an order entitling FGT to an easement of 15 feet on either side of its pipelines and
75 feet of temporary work space. The judge further ruled that FGT is entitled to approximately $8 million in interest. In
addition to ruling on other aspects of the easement, he ruled that pavement could not be placed directly over FGTs' pipeline
without the consent of FGT, although FGT would be required to relocate the pipeline if it did not provide such consent. While
FGT would seek reimbursement of any costs associated with relocation of its pipeline in connection with an FDOT project,
FGT may not be successful in obtaining such reimbursement and, as such, could be required to bear the cost of such relocation.
In any such instance, FGT would seek recovery of the reimbursement costs in rates. The judge also denied all other pending
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