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Income Tax Expense | 12 Months Ended
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Dec. 31, 2013
Income Tax Expense [Abstract] |
Income Tax Expense [Text Block] | INCOME TAX EXPENSE
Income Tax Expense |  |  |
Year Ended December 31 | 2013 |  | 2012 |  | 2011 |
Millions |  |  |
Current Tax Expense (Benefit) |  |  |
Federal (a) | — |  | — |  | $1.4
State (a) | $0.1 | $0.5 | (1.6 | )
Total Current Tax Expense (Benefit) | 0.1 |  | 0.5 |  | (0.2 | )
Deferred Tax Expense |  |  |
Federal (b) | 22.9 |  | 37.0 |  | 27.4 |
State (b) | 6.5 |  | 1.4 |  | 9.3 |
Investment Tax Credit Amortization | (0.8 | ) | (0.9 | ) | (0.9 | )
Total Deferred Tax Expense | 28.6 |  | 37.5 |  | 35.8 |
Total Income Tax Expense |  | $28.7 |  |  | $38.0 |  |  | $35.6 |
(a) | For the years ended December 31, 2013, 2012 and 2011, the federal and state current tax expense (benefit) was due to NOLs which resulted primarily from the bonus depreciation provision of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, and the American Taxpayer Relief Act of 2012. The federal and state NOLs will be carried forward to offset future taxable income.
(b) | For the year ended December 31, 2013, federal deferred tax expense is lower than the prior year primarily due to higher renewable tax credits. For the years ended December 31, 2013, 2012, and 2011, state deferred tax expense includes state renewable tax credits earned, net of valuation allowance, which will be carried forward to offset future state income taxes. The year ended December 31, 2011, included an income tax benefit for the reversal of a $6.2 million deferred tax liability related to a revenue receivable that Minnesota Power agreed to forgo as part of a stipulation and settlement agreement in its 2010 rate case and a benefit of $2.9 million related to the MPUC approval of our request to defer the retail portion of the tax charge taken in 2010 as a result of the PPACA.
Reconciliation of Taxes from Federal Statutory |  |  |
Rate to Total Income Tax Expense |  |  |
Year Ended December 31 | 2013 |  | 2012 |  | 2011 |
Millions |  |  |
Income Before Non-Controlling Interest and Income Taxes |  | $133.4 |  |  | $135.1 |  |  | $129.2 |
Statutory Federal Income Tax Rate | 35 | % | 35 | % | 35 | %
Income Taxes Computed at 35 percent Statutory Federal Rate |  | $46.7 |  |  | $47.3 |  |  | $45.2 |
Increase (Decrease) in Tax Due to: |  |  |
State Income Taxes – Net of Federal Income Tax Benefit | 4.3 |  | 1.2 |  | 6.0 |
Deferred Accounting for Retail Portion of the PPACA | — |  | — |  | (2.9 | )
2010 Rate Case Stipulation Agreement - Deferred Tax Reversal | — |  | — |  | (6.2 | )
Regulatory Differences for Utility Plant | (2.2 | ) | (2.2 | ) | (1.2 | )
Production Tax Credits | (19.2 | ) | (7.6 | ) | (4.3 | )
Other | (0.9 | ) | (0.7 | ) | (1.0 | )
Total Income Tax Expense |  | $28.7 |  |  | $38.0 |  |  | $35.6 |
The effective tax rate on income was 21.5 percent for 2013 (28.1 percent for 2012; 27.6 percent for 2011). The 2013 and 2012 effective rates were primarily impacted by renewable tax credits and by the deduction for AFUDC-Equity (included in Regulatory Differences for Utility Plant, above). The 2011 effective tax rate was primarily impacted by the deduction for AFUDC-Equity, the reversal of a deferred tax liability related to a revenue receivable that Minnesota Power agreed to forgo as part of a stipulation and settlement agreement in its 2010 rate case, renewable tax credits, and the MPUC’s approval of our request to defer the retail portion of the tax charge taken in 2010 as a result of the PPACA. NOTE 15. INCOME TAX EXPENSE (Continued)
Deferred Tax Assets and Liabilities |  |
As of December 31 | 2013 |  | 2012 |
Millions |  |
Deferred Tax Assets |  |
Employee Benefits and Compensation |  | $66.3 |  |  | $120.2 |
Property Related | 82.2 |  | 59.8 |
NOL Carryforwards | 112.8 |  | 90.8 |
Tax Credit Carryforwards | 55.1 |  | 28.3 |
Other | 16.9 |  | 24.6 |
Gross Deferred Tax Assets | 333.3 |  | 323.7 |
Deferred Tax Asset Valuation Allowance | (8.0 | ) | (2.4 | )
Total Deferred Tax Assets |  | $325.3 |  |  | $321.3 |
Deferred Tax Liabilities |  |
Property Related |  | $656.2 |  |  | $577.1 |
Regulatory Asset for Benefit Obligations | 58.7 |  | 104.3 |
Unamortized Investment Tax Credits | 11.1 |  | 11.9 |
Partnership Basis Differences | 36.7 |  | 28.6 |
Other | 22.7 |  | 30.1 |
Total Deferred Tax Liabilities |  | $785.4 |  |  | $752.0 |
Net Deferred Income Taxes |  | $460.1 |  |  | $430.7 |
Recorded as: |  |
Net Current Deferred Tax Assets (a) |  | $19.0 |  | — |
Net Current Deferred Tax Liabilities (b) | — |  |  | $6.9 |
Net Long-Term Deferred Tax Liabilities | 479.1 |  | 423.8 |
Net Deferred Income Taxes |  | $460.1 |  |  | $430.7 |
(a) | In 2013, Current Deferred Tax Assets reflect the expectation of using federal NOL carryforward deductions in 2014.
(b) | Included in Other Current Assets and Other Current Liabilities.
NOL and Tax Credit Carryforwards |  |
Year Ended December 31 | 2013 | 2012 |
Millions |  |
Federal NOL Carryforwards (a) | $279.8 |  | $244.1 |
Federal Tax Credit Carryforwards | $35.5 | $16.0
State NOL Carryforwards (a) | $156.3 | $90.6
State Tax Credit Carryforwards (b) | $11.9 | $10.3
(a) | Pretax amounts
(b) | Net of $7.7 million valuation allowance.
In 2013, we generated federal and various state NOLs and tax credit carryforwards primarily due to the bonus depreciation provision of the American Taxpayer Relief Act of 2012. The 2013 federal NOL will be utilized by carrying it forward to offset future years’ income. The federal NOL and tax credit carryforward periods expire between 2019 and 2032; included in the federal NOL carryforward are charitable contribution carryforwards which expire between 2014 and 2016. We expect to fully utilize the federal NOL, charitable contributions, and federal tax credit carryforwards; therefore no Federal valuation allowance has been recognized as of December 31, 2013. The state NOLs and tax credits will be carried forward to future tax years. We have established a valuation allowance against certain state NOL and tax credits that we do not expect to utilize before their expiration. The state NOL and tax credit carryforward periods expire between 2024 and 2032; included in the state NOL carryforwards are charitable contribution carryforwards which expire between 2014 and 2016. NOTE 15. INCOME TAX EXPENSE (Continued)
Gross Unrecognized Income Tax Benefits | 2013 |  | 2012 |  | 2011 |
Millions |  |  |
Balance at January 1 |  | $2.7 |  |  | $11.4 |  |  | $12.3 |
Additions for Tax Positions Related to the Current Year | 0.1 |  | — |  | — |
Additions for Tax Positions Related to Prior Years | 1.3 |  | — |  | — |
Reductions for Tax Positions Related to Prior Years | — |  | (8.7 | ) | (0.9 | )
Reductions for Settlements | (2.9 | ) | — |  | — |
Balance as of December 31 |  | $1.2 |  |  | $2.7 |  |  | $11.4 |
Unrecognized tax benefits are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the “more-likely-than-not” criteria. The unrecognized tax benefit balance includes permanent tax positions which, if recognized would affect the annual effective income tax rate. In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The gross unrecognized tax benefits as of December 31, 2013, includes $0.2 million of net unrecognized tax benefits which, if recognized, would affect the annual effective income tax rate. The decrease in the unrecognized tax benefit balance of $2.9 million in 2013 was due to the removal of our uncertain tax positions for positions effectively settled with the IRS for tax years 2005 through 2009. The decrease in the unrecognized tax benefit balance of $8.7 million in 2012 was due to the removal of our uncertain tax position for our tax accounting method change for deductible repairs. During 2012, the IRS issued a directive from its Large Business and International Division to its local examination teams that led to the removal of the repairs uncertain tax position in 2012. As of December 31, 2013, we had $0.5 million ($0.5 million for 2012 and $1.1 million for 2011) of accrued interest related to unrecognized tax benefits included in our Consolidated Balance Sheet. We classify interest related to unrecognized tax benefits as interest expense and tax-related penalties in operating expenses in our Consolidated Statement of Income. In 2013, we recognized no interest expense (decrease in interest expense of $0.6 million for 2012 and interest expense of $0.4 million for 2011). Increases to our interest expense during 2013 were offset by decreases related to the interest benefit associated with the NOL and tax credit carryforwards. There were no penalties recognized in 2013, 2012 or 2011. ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate state income tax returns in various jurisdictions. ALLETE has settled with the IRS for the audit of tax years 2005 through 2009. ALLETE is no longer subject to federal or state examination for years before 2005. During the next 12 months it is reasonably possible the amount of unrecognized tax benefits could be reduced by $0.2 million due to the expiration of the statute of limitations. This amount is primarily due to temporary tax positions. In September 2013 the U.S. Treasury issued final regulations addressing the tax consequences associated with the acquisition, production and improvement of tangible property. The regulations are generally effective for tax years beginning January 1, 2014. As ALLETE is adopting certain utility-specific guidance for deductible repairs previously issued by the IRS, the issuance will not have a material impact on our consolidated financial statements.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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