Vectren 2008 Annual Report Download - page 82

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80
A reconciliation of the federal statutory rate to the effective income tax rate follows:
2006
Statutory rate: 35.0 % 35.0 % 35.0 %
State and local taxes-net of federal benefit 3.9 4.3 5.7
Amortization of investment tax credit (0.6) (0.8) (1.4)
Depletion (0.4) (0.7) (1.6)
Other tax credits (0.9) (0.2) (0.5)
Synfuel tax credits - (3.0) (9.6)
Tax law change - 0.2 (2.5)
Adjustment of income tax accruals - - (2.0)
All other-net 0.1 (0.1) (1.3)
Effective tax rate 37.1 % 34.7 % 21.8 %
Year Ended December 31,
20072008
The components of income tax expense and utilization of investment tax credits follow:
(In millions) 2008 2007 2006
Current:
Federal (14.8)$ 35.9$ 18.2$
State 11.3 13.1 10.7
Total current taxes (3.5) 49.0 28.9
Deferred:
Federal 78.2 24.6 7.0
State 2.7 4.1 (3.6)
Total deferred taxes 80.9 28.7 3.4
Amortization of investment tax credits (1.3) (1.7) (2.0)
Total income tax expense 76.1$ 76.0$ 30.3$
Year Ended December 31,
Accounting for Uncertainty in Income Taxes
On January 1, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48) “Accounting for Uncertainty in
Income Taxes” an interpretation of SFAS 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition
threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or
expected to be taken in an income tax return. FIN 48 also provides guidance related to reversal of tax positions,
balance sheet classification, interest and penalties, interim period accounting, disclosure and transition.
As a result of the implementation of FIN 48, the Company recognized an approximate $0.3 million increase in the
liability for unrecognized tax benefits, of which $0.1 million was accounted for as a reduction to the January 1,
2007 balance of Retained earnings and $0.2 million was recorded as an increase to Goodwill. At adoption, the total
amount of gross unrecognized tax benefits was $11.6 million.
The Company and/or certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various
states. The Internal Revenue Service (IRS) has conducted examinations of the Company’s U.S. federal income tax
returns for tax years through December 31, 2005. The State of Indiana, the Company’s primary state tax
jurisdiction, has conducted examinations of state income tax returns for tax years through December 31, 2002. The
statutes of limitations for assessment of federal and Indiana income tax have expired with respect to tax years
through 2002.