Vectren 2012 Annual Report Download - page 90

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Uncertain Tax Positions
Following is a roll forward of unrecognized tax benefits for the three years ended December 31, 2012:
(In millions) 2012 2011 2010
Unrecognized tax benefits at January 1 $ 12.4 $ 13.3 $ 11.5
Gross increases - tax positions in prior periods 0.2 3.3 1.6
Gross decreases - tax positions in prior periods (9.4) (4.5) (0.3)
Gross increases - current period tax positions 1.9 0.6 1.0
Settlements (0.3) (0.3) —
Lapse of statute of limitations — — (0.5)
Unrecognized tax benefits at December 31 $ 4.8 $ 12.4 $ 13.3
Of the change in unrecognized tax benefits during 2012, 2011, and 2010, almost none impacted the effective rate. The amount
of unrecognized tax benefits, which if recognized, that would impact the effective tax rate was $0.7 million at each of
December 31, 2012, 2011 and 2010. As of December 31, 2012, the unrecognized tax benefit relates to tax positions for which
the ultimate deductibility is more likely than not but for which there is uncertainty about the timing of such deductibility. Because
of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period
would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. Thus, it is not
expected that any changes to these tax positions would have a significant impact on earnings.
The Company recognized income related to a reversal of interest expense previously accrued and net of penalties totaling $0.7
million in 2012 and recognized expense related to interest and penalties totaling approximately $0.4 million in 2011, and $0.3
million in 2010. The Company had approximately $0.6 million and $1.3 million for the payment of interest and penalties accrued
as of December 31, 2012 and 2011, respectively.
The net liability on the Consolidated Balance Sheet for unrecognized tax benefits inclusive of interest, penalties and net of
secondary impacts which are a component of the Deferred income taxes and are benefits, totaled $3.2 million and $10.1 million,
respectively, at December 31, 2012 and 2011.
The Company and/or certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. The
Internal Revenue Service (IRS) has concluded examinations of the Company's U.S. federal income tax returns for tax years
through December 31, 2005. Tax years 2006 and 2008 have recently been examined by the IRS, and such examination resulted
in no assessments but is in IRS Joint Committee review currently. The primary focus of the IRS examination was certain repairs
and maintenance deductions, an area of particular focus by the IRS throughout the utility industry. In 2012, the IRS suspended
all examinations related to this issue generally, resulting in the elimination of the audit risk in this area for the company through
2012. To the extent IRS guidance changes in this area, any impact is not expected to be material to the Company's result of
operations or financial condition. Further, the Company does not expect any changes to this liability for unrecognized income tax
benefits within the next 12 months that would significantly impact the Company's results of operations or financial condition. The
State of Indiana, the Company's primary state tax jurisdiction, has conducted examinations of state income tax returns for tax
years through December 31, 2007. The statutes of limitations for assessment of federal income tax have expired with respect to
tax years through 2005 and through 2008 for Indiana income tax.
11. Retirement Plans & Other Postretirement Benefits
At December 31, 2012, the Company maintains three qualified defined benefit pension plans, a nonqualified supplemental
executive retirement plan (SERP), and a postretirement benefit plan. The defined benefit pension plans and postretirement
benefit plan, which cover eligible full-time regular employees, are primarily noncontributory. The postretirement health care and
life insurance plans are a combination of self-insured and fully insured plans. The qualified pension plans and the SERP are
aggregated under the heading “Pension Benefits.” The postretirement benefit plan is presented under the heading “Other
Benefits.”