CenterPoint Energy 2009 Annual Report Download - page 124

102
Liens. As of December 31, 2009, CenterPoint Houston’s assets were subject to liens securing approximately
$253 million of first mortgage bonds. Sinking or improvement fund and replacement fund requirements on the first
mortgage bonds may be satisfied by certification of property additions. Sinking fund and replacement fund
requirements for 2007, 2008 and 2009 have been satisfied by certification of property additions. The replacement
fund requirement to be satisfied in 2010 is approximately $172 million, and the sinking fund requirement to be
satisfied in 2010 is approximately $3 million. CenterPoint Energy expects CenterPoint Houston to meet these 2010
obligations by certification of property additions. As of December 31, 2009, CenterPoint Houston’s assets were also
subject to liens securing approximately $2.5 billion of general mortgage bonds which are junior to the liens of the
first mortgage bonds.
(9) Income Taxes
The components of CenterPoint Energy’s income tax expense were as follows:
Year Ended December 31,
2007 2008 2009
(In millions)
Current income tax expense (benefit):
Federal .................................................. $ 161 $ (221) $ (103)
State ...................................................... 32 11 10
Total current expense (benefit) ......... 193 (210) (93)
Deferred income tax expense (benefit):
Federal .................................................. 47 437 251
State ...................................................... (47) 50 18
Total deferred expense......................
—
487 269
Total income tax expense.......................... $ 193 $ 277 $ 176
A reconciliation of the expected federal income tax expense using the federal statutory income tax rate to the
actual income tax expense and resulting effective income tax rate is as follows:
Year Ended December 31,
2007 2008 2009
(In millions)
Income before income taxes ............................................................................................ $ 588 $ 723 $ 548
Federal statutor
y
income tax rate .................................................................................... 35% 35% 35%
Expected federal income tax expense ............................................................................. 206 253 192
Increase (decrease) in tax expense resultin
g
from:
State income tax expense (benefit), net of federal income tax.................................... (10) 40 18
Amortization of investment tax credi
t
......................................................................... (8) (7) (7)
Tax basis balance sheet ad
j
ustments ........................................................................... 25
—
—
Increase (decrease) in settled and uncertain income tax positions .............................. (20) 8 (5)
Other, ne
t
....................................................................................................................
—
(17) (22)
Total ........................................................................................................................ (13) 24 (16)
Total income tax expense ................................................................................................ $ 193 $ 277 $ 176
Effective tax rate ............................................................................................................. 32.8% 38.4% 32.1%
As a result of its settlement with the IRS for tax years 2004 and 2005, CenterPoint Energy recorded an income tax
benefit of approximately $11 million in 2009 related to a reduction in the liability for uncertain tax positions of
approximately $41 million. The state income tax expense of $18 million for 2009 includes a benefit of
approximately $12 million, net of federal income tax effect, related to adjustments in prior years’ state estimates.
Changes in the Texas State Franchise Tax Law (Texas margin tax) resulted in classifying Texas margin tax of
approximately $8 million and $10 million, net of federal income tax effect, as income tax expense in 2008 and 2009,
respectively, for CenterPoint Houston. The state income tax benefit of $10 million for 2007 includes a benefit of
approximately $30 million, net of federal income tax effect, as a result of the Texas margin tax and a Texas state tax
examination for the tax years 2002 and 2004.