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Income Taxes
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6 Months Ended | ||
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Jun. 30, 2011
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| Income Taxes | |||
| Income Taxes |
NiSource's interim effective tax rates reflect the estimated annual effective tax rates for 2011 and 2010, adjusted for tax expense associated with certain discrete items. The effective tax rates for the three months ended June 30, 2011 and June 30, 2010 were 43.2% and 35.5%, respectively. The effective tax rates for the six months ended June 30, 2011 and June 30, 2010 were 36.1% and 35.7%, respectively. These effective tax rates differ from the Federal tax rate of 35% primarily due to the effects of tax credits, state income taxes, utility rate-making, and other permanent book-to-tax differences such as the electric production tax deduction provided under Internal Revenue Code Section 199. The increase in the three and six month effective tax rates of 7.7% and 0.4% in 2011 versus 2010 is due primarily to an increase in tax expense resulting from recently enacted Indiana tax legislation partially offset by a reduction in tax expense to reflect utility rate-making flow through taxes in the state of Pennsylvania and the reversal of the 2009 Section 199 credits in the second quarter of 2010. On May 12, 2011, the governor of Indiana signed into law House Bill 1004, which among other things, lowers the corporate income tax rate from 8.5% to 6.5% over four years beginning on July 1, 2012. The reduction in the tax rate will impact deferred income taxes and tax related regulatory assets and liabilities recoverable in the rate making process. In addition, other deferred tax assets and liabilities, primarily deferred tax assets related to Indiana net operating loss carryforward, will be reduced to reflect the lower rate at which these temporary differences and tax benefits will be realized. In the second quarter 2011, the Company recorded tax expense of $6.8 million to reflect the effect of this rate change. There were no material changes recorded in the second quarter of 2011 to NiSource's uncertain tax positions as of December 31, 2010. |