Xcel Energy 2013 Annual Report Download - page 114

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Federal Audit — Xcel Energy files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy’s
2008 federal income tax return expired in September 2012. The statute of limitations applicable to Xcel Energy’s 2009 federal income
tax return expires in June 2015. In the third quarter of 2012, the IRS commenced an examination of tax years 2010 and 2011,
including the 2009 carryback claim. As of Dec. 31, 2013, the IRS had proposed an adjustment to the federal tax loss carryback claims
that would result in $10 million of income tax expense for the 2009 through 2011 claims and the anticipated claim for 2013. Xcel
Energy is continuing to work through the audit process, but the outcome and timing of a resolution are uncertain.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions of Colorado,
Minnesota, Texas, and Wisconsin, and various other state income-based tax returns. As of Dec. 31, 2013, Xcel Energy’s earliest open
tax years that are subject to examination by state taxing authorities in its major operating jurisdictions were as follows:
State Year
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009
In the fourth quarter of 2013, the state of Colorado completed an examination of tax years 2006 through 2009. In the first quarter of
2013, the state of Wisconsin commenced an examination of tax years 2009 through 2011. As of Dec. 31, 2013, no material
adjustments had been proposed for either of these audits. There are currently no other state income tax audits in progress.
Unrecognized Tax Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would
affect the annual ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions 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 ETR but would accelerate the payment of cash to the taxing authority to an earlier period.
A reconciliation of the amount of unrecognized tax benefit is as follows:
(Millions of Dollars) Dec. 31, 2013 Dec. 31, 2012
Unrecognized tax benefit — Permanent tax positions . . . . . . . . . . . . . . . . $ 12.9 $ 4.7
Unrecognized tax benefit — Temporary tax positions . . . . . . . . . . . . . . . . 28.3 29.8
Total unrecognized tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41.2 $ 34.5
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
(Millions of Dollars) 2013 2012 2011
Balance at Jan. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34.5 $ 34.7 $ 40.5
Additions based on tax positions related to the current year. . . . . . . . . . . . 15.1 5.2 11.9
Reductions based on tax positions related to the current year. . . . . . . . . . . (0.4)(5.7)(1.9)
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . 21.6 9.6 14.0
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . (4.8)(9.3)(2.4)
Settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24.8) — (27.3)
Lapse of applicable statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . — — (0.1)
Balance at Dec. 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41.2 $ 34.5 $ 34.7
The unrecognized tax benefit amounts were reduced by the tax benefits associated with NOL and tax credit carryforwards. The
amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:
(Millions of Dollars) Dec. 31, 2013 Dec. 31, 2012
NOL and tax credit carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (27.1) $ (33.5)
It is reasonably possible that Xcel Energy’s amount of unrecognized tax benefits could significantly change in the next 12 months as
the IRS and state audits progress. As the IRS examination moves closer to completion, it is reasonably possible that the amount of
unrecognized tax benefit could decrease up to approximately $20 million.