Health Net 2013 Annual Report Download - page 150

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-46
Note 11—Income Taxes
Continuing Operations
Significant components of the provision for income taxes from continuing operations are as follows for the
years ended December 31:
2013 2012 2011
(Dollars in millions)
Current tax expense:
Federal............................................................................................. $ 79.0 $ (3.4) $ 77.8
State................................................................................................. 12.5 (1.2) 14.5
Total current tax expense.......................................................................... 91.5 (4.6) 92.3
Deferred tax expense (benefit):
Federal............................................................................................. 15.0 11.1 5.1
State................................................................................................. (6.4)(2.2) 2.7
Total deferred tax expense (benefit).......................................................... 8.6 8.9 7.8
Interest expense, gross of related tax effects............................................. (0.3) 1.7 0.6
Total income tax provision........................................................................ $ 99.8 $ 6.0 $ 100.7
A reconciliation of the statutory federal income tax rate and the effective income tax rate on income from
continuing operations is as follows for the years ended December 31:
2013 2012 2011
Statutory federal income tax rate .............................................................. 35.0% 35.0% 35.0%
State and local taxes, net of federal income tax effect.............................. 1.5 (6.9) 6.9
Valuation allowance (release) against capital losses, net operating
losses or tax credits .............................................................................. — (26.5) 21.9
Non-deductible compensation................................................................... 3.6 17.7 2.3
Tax exempt interest income...................................................................... (2.4) (12.7) (2.2)
Sale of subsidiaries.................................................................................... — 1.8 (3.9)
Interest expense......................................................................................... (0.1) 5.3 0.5
Lobbying expense ..................................................................................... 0.4 3.4 0.8
Other, net................................................................................................... (1.0) 1.8 1.0
Effective income tax rate .......................................................................... 37.0% 18.9% 62.3%
The effective income tax rate from continuing operations was 37.0%, 18.9% and 62.3% for the years ended
December 31, 2013, 2012 and 2011, respectively. Our effective income tax rate for the year ended December 31, 2013
varies from the statutory federal rate of 35% primarily due to state income taxes, tax exempt investment income, and
non-deductible compensation. During the year ended December 31, 2011, a judgment was rendered in the AmCareco
litigation (see Note 13) that resulted in deferred tax assets of $51.1 million. Realization of these deferred tax assets was
uncertain and therefore, a valuation allowance for the full amount was established. The most significant change in the
effective income tax rate from 2011 to 2012 is as a result of the absence of such litigation effects in 2012. Our effective
income tax rate for the year ended December 31, 2012 is lower than the statutory federal rate of 35% primarily due to
the effect of tax-exempt income and reductions of valuation allowances against deferred assets, which resulted from the