Xcel Energy 2008 Annual Report Download - page 112

These unrecognized tax benefit amounts were reduced by the tax benefits associated with net operating loss and tax
credit carryovers reported in continuing operations of $7.8 million on Dec. 31, 2007 and $13.1 million on Dec. 31,
2008 and net operating loss and tax credit carryovers reported in discontinued operations of $17.8 million on Dec. 31,
2007 and $26.5 million on Dec. 31, 2008.
The unrecognized tax benefit balance reported in continuing operations included $9.8 million and $9.2 million of tax
positions on Dec. 31, 2007 and 2008, respectively, which if recognized would affect the annual effective tax rate. In
addition, the unrecognized tax benefit balance reported in continuing operations included $16.5 million and
$26.3 million of tax positions on Dec. 31, 2007 and 2008, respectively, for which the ultimate deductibility is highly
certain but for which there is uncertainty about the timing of such deductibility. A change in the period of
deductibility would not affect the effective tax rate but would accelerate the payment of cash to the taxing authority to
an earlier period.
The increase in the unrecognized tax benefit balance reported in continuing operations of $9.2 million from Dec. 31,
2007 to Dec. 31, 2008, was due to the addition of similar uncertain tax positions related to ongoing activity, partially
offset by a decrease due to the expiration of statutes of limitations. Xcel Energy’s amount of unrecognized tax benefits
for continuing operations could significantly change in the next 12 months as the IRS audit of 2006 and 2007
progresses and when state audits resume. At this time, due to the uncertain nature of the audit process, it is not
reasonably possible to estimate an overall range of possible change.
The liability for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with net
operating loss and tax credit carryovers. The amount of interest expense related to unrecognized tax benefits reported
within interest charges in continuing operations in 2007 was $43.7 million. The amount of interest income related to
unrecognized tax benefits reported within interest charges in continuing operations in 2008 was $3.9 million. The
liability for interest related to unrecognized tax benefits reported in continuing operations was $5.8 million and
$1.9 million on Dec. 31, 2007 and 2008, respectively. The amount of interest expense related to unrecognized tax
benefits reported within interest charges in discontinued operations in 2007 was $1.6 million. The amount of interest
income related to unrecognized tax benefits reported within interest charges in discontinued operations in 2008 was
$1.0 million. The receivable for interest related to unrecognized tax benefits reported in discontinued operations was
$0.5 million and $1.5 million on Dec. 31, 2007 and 2008, respectively.
The amount of penalty expense related to unrecognized tax benefits reported within interest charges in continuing
operations in 2007 was $3.2 million. The liability for penalties related to unrecognized tax benefits reported in
continuing operations was $1.0 million on Dec. 31, 2007. In 2008, the liability for penalties related to unrecognized
tax benefits was reversed and a $1.0 million benefit was reported within interest charges in continuing operations in
2008. No amounts were accrued for penalties as of Dec. 31, 2008.
Other Income Tax Matters — Xcel Energy’s federal net operating loss and tax credit carryforwards are estimated to be
$127 million and $223 million, respectively, as of Dec. 31, 2008, and $459 million and $140 million, respectively, as
of Dec. 31, 2007. A portion of the net operating loss and tax credit carryforwards in the amount of $49 million and
$126 million, respectively, as of Dec. 31, 2008 and $282 million and $51 million, respectively, as of Dec. 31, 2007, are
included in discontinued operations. The carryforward periods expire between 2021 and 2028. Xcel Energy also has
state net operating loss and tax credit carryforwards of $1.1 billion and $17 million, respectively, as of Dec. 31, 2008
and $1.4 billion and $15 million, respectively, as of Dec. 31, 2007. A portion of the state net operating loss and tax
credit carryforwards in the amount of $980 million and $2 million, respectively, as of Dec. 31, 2008 and $1.3 billion
and $1 million, respectively, as of Dec. 31. 2007 are included in discontinued operations. The state carryforward
periods expire between 2009 and 2027. Xcel Energy has a valuation allowance for its state net operating loss
carryforward in the amount of $37 million and $16 million as of Dec. 31, 2008 and Dec. 31, 2007, respectively,
primarily reported in discontinued operations.
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