Note 9: Income Taxes

Provisions for Federal and State Income Taxes in the accompanying consolidated statements of earnings for the years ended December 31, 2013, 2012 and 2011 are shown in the table below:


	($000’s)
	2013			2012			2011
Current Federal Tax Provision (Benefit)
Current Benefit of Operating Loss Carrybacks	$	—		$	—		$	—

Total Current Federal Tax Provision (Benefit)		—			—			—

Deferred Federal Tax Provision (Benefit)
Utility Plant Differences		28,907			6,019			13,002
Net Operating Loss Carryforwards		(8,053	)		2,835			(4,844	)
Regulatory Assets and Liabilities		(11,483	)		472			513
Other, net		681			(241	)		(695	)

Total Deferred Federal Tax Provision (Benefit)		10,052			9,085			7,976

Total Federal Tax Provision		10,052			9,085			7,976

State
Current		386			132			1,358
Deferred		2,214			1,759			691

Total State Tax Provision		2,600			1,891			2,049

Total Provision for Federal and State Income Taxes	$	12,652		$	10,976		$	10,025

The differences between the Company’s provisions for Income Taxes and the provisions calculated at the statutory federal tax rate, expressed in percentages, are shown below:


	2013			2012			2011
Statutory Federal Income Tax Rate		34	%		34	%		34	%
Income Tax Effects of:
State Income Taxes, Net		5			5			5
Utility Plant Differences		(2	)		(2	)		(1	)
Other, Net		—			1			—

Effective Income Tax Rate		37	%		38	%		38	%

Temporary differences which gave rise to current deferred tax assets and liabilities in 2013 and 2012, are shown below:


Current Deferred Income Taxes (000’s)	2013		2012
Accrued Revenue, Current Portion	$	6,583	$	13,568
Other, net		108		(168	)

Total Current Deferred Income Tax Liabilities	$	6,691	$	13,400

Temporary differences which gave rise to noncurrent deferred tax assets and liabilities in 2013 and 2012, are shown below:


Noncurrent Deferred Income Taxes (000’s)	2013			2012
Utility Plant Differences	$	102,479		$	66,907
Net Operating Loss Carryforwards		(17,403	)		(8,521	)
AMT Tax Credit Carryforwards		(1,538	)		(1,538	)
Regulatory Assets & Liabilities		17,174			17,872
Retirement Benefit Obligations		(28,287	)		(38,644	)
Other, net		754			2,606

Total Noncurrent Deferred Income Tax Liabilities	$	73,179		$	38,682

The Company is subject to federal and state income taxes as well as various other business taxes. The Company accounts for income taxes in accordance with the FASB Codification guidance on Income Taxes which requires an asset and liability approach for the financial accounting and reporting of income taxes. Significant judgments and estimates are required in determining the current and deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities reflect its best assessment of estimated future taxes to be paid. Periodically, the Company assesses the realization of its deferred tax assets and liabilities and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts and circumstances which gave rise to the revision become known.

The Company filed its tax returns for the year ended December 31, 2012 with the Internal Revenue Service (IRS) in September 2013 and generated federal net operating loss (NOL) carryforward assets of $6.6 million principally due to tax repair expensing and bonus depreciation. As of December 31, 2013, the Company had recorded cumulative federal and state NOL carryforward assets of $17.4 million to offset against taxes payable in future periods. If unused, the Company’s state NOL carryforward assets will begin to expire in 2019 and the federal NOL carryforward assets will begin to expire in 2029. In addition, at December 31, 2013, the Company had $1.5 million of cumulative Alternative Minimum Tax (AMT) credit carryforwards to offset future AMT taxes payable indefinitely.

In the third quarter of 2013, the State of Massachusetts eliminated the classification of Public Service Corporation for utilities and now all public service entities, including utilities, will be taxed at the Massachusetts 8% corporate rate effective tax years beginning after January 1, 2014. Additionally, corporations in Massachusetts will now be able to carryforward NOLs created after January 1, 2014.

The Company evaluated its tax positions at December 31, 2013 in accordance with the FASB Codification, and has concluded that no adjustment for recognition, derecognition, settlement and foreseeable future events to any tax liabilities or assets as defined by the FASB Codification is required. The Company remains subject to examination by Federal, Maine, Massachusetts, and New Hampshire tax authorities for the tax periods ended December 31, 2010; December 31, 2011; and December 31, 2012.