Entergy 2012 Annual Report Download - page 78

Entergy Corporation and Subsidiaries 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTE 3. INCOME TAXES
Income taxes from continuing operations for 2012, 2011, and 2010
for Entergy Corporation and Subsidiaries consist of the following
(in thousands):
2012 2011 2010
Current:
Federal $ (47,851) $452,713 $145,161
Foreign 143 130 131
State (41,516) 152,711 19,313
Total (89,224) 605,554 164,605
Deferred and non-current - net 131,130 (311,708) 468,698
Investment tax credit
adjustments - net (11,051) (7,583) (16,064)
Income tax expense from
continuing operations $ 30,855 $286,263 $617,239
Total income taxes for Entergy Corporation and Subsidiaries differ
from the amounts computed by applying the statutory income tax rate
to income before income taxes. The reasons for the differences for the
years 2012, 2011, and 2010 are (in thousands):
2012 2011 2010
Net income attributable to
Entergy Corporation $ 846,673 $1,346,439 $1,250,242
Preferred dividend
requirements of subsidiaries 21,690 20,933 20,063
Consolidated net income 868,363 1,367,372 1,270,305
Income taxes 30,855 286,263 617,239
Income before income taxes $ 899,218 $1,653,635 $1,887,544
Computed at statutory
rate (35%) $ 314,726 $ 578,772 $ 660,640
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 40,699 93,940 40,530|
Regulatory differences -
utility plant items 35,527 39,970 31,473
Equity component of AFUDC (30,838) (30,184) (16,542)
Amortization of investment
tax credits (14,000) (14,962) (15,980)
Flow-through/permanent
differences (14,801) (17,848) (26,370)
Net-of-tax regulatory liability(a) (4,356) 65,357 –
Deferred tax reversal on
PPA settlement(a) – (421,819) –
Deferred tax asset on
additional depreciation(b) (155,300) – –
Write-off of
reorganization costs – – (19,974)
Tax law change - Medicare
Part D – – 13,616
Write-off of regulatory asset for
income taxes 42,159 – –
Capital losses (20,188) – –
Provision for uncertain
tax positions(c) (159,957) 2,698 (43,115)
Other - net (2,816) (9,661) (7,039)
Total income
taxes as reported $ 30,855 $ 286,263 $ 617,239
Effective income tax rate 3.4% 17.3% 32.7%
(a) See “Income Tax Audits - 2006-2007 IRS Audit” below for discussion of
these items.
(b) See “Income Tax Audits - 2004-2005 IRS Audit” below for discussion
of this item.
(c) See “Income Tax Audits - 2008-2009 IRS Audit” below for discussion of
the most significant item in 2012.
Significant components of accumulated deferred income taxes and
taxes accrued for Entergy Corporation and Subsidiaries as of December
31, 2012 and 2011 are as follows (in thousands):
2012 2011
Deferred tax liabilities:
Plant basis differences - net $ (8,240,342) $ (7,043,758)
Regulatory assets (898,143) (930,370)
Nuclear decommissioning trusts (848,918) (553,558)
Combined unitary state taxes (233,210) (227,427)
Power purchase agreements – (17,138)
Other (485,550) (402,097)
Total (10,706,163) (9,174,348)
Deferred tax assets:
Nuclear decommissioning liabilities 733,103 612,945
Regulatory liabilities 404,852 197,554
Pension and other post-employment benefits 358,893 315,134
Sale and leaseback 195,074 217,430
Accumulated deferred investment tax credit 110,690 108,338
Provision for contingencies 61,576 28,504
Power purchase agreements 43,717 –
Net operating loss carryforwards 960,235 253,518
Capital losses 13,631 12,995
Valuation allowance (86,881) (85,615)
Other 141,592 160,620
Total 2,936,482 1,821,423
Noncurrent accrued taxes (including
unrecognized tax benefits) (210,534) (814,597)
Accumulated deferred income
taxes and taxes accrued $ (7,980,215) $ (8,167,522)
Entergy’s estimated tax attributes carryovers and their expiration
dates as of December 31, 2012 are as follows:
Carryover Description Carryover Amount Years of Expiration
Federal net operating losses $ 12.6 billion 2028 - 2032
State net operating losses $ 11.2 billion 2013 - 2032
State capital losses $ 177 million 2013 - 2015
Miscellaneous federal and
state credits $81.9 million 2013 - 2032
As a result of the accounting for uncertain tax positions, the
amount of the deferred tax assets reflected in the financial statements
is less than the amount of the tax effect of the federal and state net
operating loss carryovers, tax credit carryovers, and other tax attri-
butes reflected on income tax returns.
Because it is more likely than not that the benefit from certain state
net operating and capital loss carryovers will not be utilized, a valua-
tion allowance of $69.6 million and $13.6 million has been provided
on the deferred tax assets relating to these state net operating and
capital loss carryovers, respectively.
Unrecognized Tax Benefits
Accounting standards establish a “more-likely-than-not” recognition
threshold that must be met before a tax benefit can be recognized in
the financial statements. If a tax deduction is taken on a tax return,
but does not meet the more-likely-than-not recognition threshold,
an increase in income tax liability, above what is payable on the
tax return, is required to be recorded. A reconciliation of Entergy’s
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