OG&E 2012 Annual Report Download - page 68

(Year ended December 31) 2012 2011 2010
Statutory Federal tax rate 35.0% 35.0% 35.0%
Amortization of net unfunded
deferred taxes 0.8 0.7 0.7
Medicare Part D subsidy –0.2 2.6
Qualified production activities –– (0.2)
State income taxes, net of Federal
income tax benefit (0.1) 0.6 1.7
Federal investment tax credits, net (0.4) (0.7) (0.8)
401(k) dividends (0.5) (0.5) (0.6)
Income attributable to
noncontrolling interest (1.6) (1.3) (0.4)
Federal renewable energy credit(A) (7.2) (3.4) (3.4)
Other –0.1 0.3
Effective income tax rate 26.0% 30.7% 34.9%
(A) These are credits associated with the production from OG&E’s wind farms.
At December 31, 2012 and 2011, the Company had no material
unrecognized tax benefits related to uncertain tax positions.
The deferred tax provisions are recognized as costs in the ratemaking
process by the commissions having jurisdiction over the rates charged
by OG&E. The components of Deferred Income Taxes at December 31,
2012 and 2011, respectively, were as follows:
(In millions, December 31) 2012 2011
Current deferred income tax assets
Net operating losses $÷«152.4 $÷÷«15.8
Accrued liabilities 27.1 13.2
Federal tax credits 6.0 –
Accrued vacation 3.8 4.2
Uncollectible accounts 1.0 1.4
Total current deferred income tax assets 190.3 34.6
Current accrued income tax liabilities
Derivative instruments (2.6) (2.5)
Total current accrued income tax liabilities (2.6) (2.5)
Current deferred income tax assets, net $÷«187.7 $÷÷«32.1
Non-current deferred income tax liabilities
Accelerated depreciation and other property
related differences $1,660.3 $1,437.5
Investment in Enogex Holdings 638.0 571.8
Company pension plan 52.4 67.5
Income taxes refundable to customers, net 21.2 28.0
Regulatory asset 18.8 21.2
Bond redemption-unamortized costs 4.0 4.4
Derivative instruments 1.5 –
Total non-current deferred income tax liabilities 2,396.2 2,130.4
Non-current deferred income tax assets
Net operating losses (159.1) (225.2)
State tax credits (83.7) (63.0)
Regulatory liabilities (71.4) (65.3)
Federal tax credits (69.6) (49.7)
Postretirement medical and life insurance benefits (57.6) (50.2)
Derivative instruments –(12.1)
Deferred Federal investment tax credits (1.5) (2.3)
Other (4.5) (11.2)
Total non-current deferred income tax assets (447.4) (479.0)
Non-current deferred income tax liabilities, net $1,948.8 $1,651.4
During 2012 and 2011, the Company had a Federal tax operating loss
primarily caused by the accelerated tax “bonus” depreciation provision
contained within the Tax Relief, Unemployment Insurance Reauthorization
and Job Creation Act of 2010 which allowed the Company to record a
current income tax deduction for 100 percent of the cost of certain prop-
erty placed into service in 2011 and 50 percent for certain property placed
into service in 2012. For financial accounting purposes, the Company
recorded an increase in its Non-Current Deferred Income Taxes Liability at
December 31, 2012 and 2011 on the Company’s Consolidated Balance
Sheet to recognize the financial statement impact of this new law.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was
signed into law. Among other things, the law included an extension of
bonus depreciation for one year for property generally placed in service
before January 1, 2014. Because this new law was enacted in 2013,
GAAP requires the law to be considered retroactive legislation, the impact
of which must be recorded in the period enacted. The impact of the
new law will be reflected in the Company’s 2013 Consolidated Financial
Statements as an increase in Deferred Tax Liabilities with a correspon-
ding increase in Deferred Tax Assets related to the net operating loss.
In June 2010, new legislation was passed in Oklahoma that created
a moratorium, from July 1, 2010 through June 30, 2012, on 30 income
tax credits. For income tax purposes, credits affected by the moratorium
could not be claimed for any event, transaction, investment, expenditure
or other act for which the credits would otherwise be allowable. During
this two-year period, affected credits generated by the Company were
deferred and will be utilized at a future date. For financial accounting
purposes, the Company is receiving the benefits as most of these credits
did not expire if they were not utilized in the period they were generated.
Other
The Company sustained Federal and state tax operating losses in
2012 and 2011 caused primarily by bonus depreciation and other book
verses tax temporary differences. As a result, the Company accrued
Federal and state income tax benefits in 2012 and 2011. The Company
can no longer carry these losses back to prior periods, therefore, these
losses are being carried forward. In addition to the operating losses, the
Company was unable to utilize the various tax credits that were gener-
ating during these years. These tax losses and credits are being carried
as deferred tax assets and will be utilized in future periods. Under current
law, the Company anticipates future taxable income will be sufficient to
utilize all of the losses and credits before they begin to expire, accord-
ingly no valuation allowance is considered necessary. The following
table summarizes these carry forwards:
66 OGE Energy Corp.