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INCOME TAXES | 12 Months Ended
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Dec. 31, 2011
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 3 INCOME TAXES Deferred income taxes reflect temporary differences between the valuation of assets and liabilities for financial and tax reporting. As of December 31, 2011, Artesian Resources has federal net operating loss carry-forwards aggregating approximately $6.6 million, which will expire if unused by 2031. As of December 31, 2011, Artesian Resources has separate company state net operating loss carry-forwards aggregating approximately $15.9 million. These net operating loss carry-forwards will expire if unused between 2024 and 2031. Artesian Resources has recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized due to the expiration of the state net operating loss carry-forwards. Management believes that it is more likely than not that the Company will realize the benefits of these net deferred tax assets. The valuation allowance increased from approximately $45,000 in 2010 to approximately $53,000 in 2011. At December 31, 2011, for federal income tax purposes, there were alternative minimum tax credit carry-forwards aggregating $3.7 million resulting from the payment of alternative minimum tax in current and prior years. These alternative minimum tax credit carry-forwards may be carried forward indefinitely to offset future regular federal income taxes. Under FASB ASC Topic 740, an uncertain tax position represents our expected treatment of a tax position taken, or planned to be taken in the future, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of our review of our tax positions, we determined that we had no material uncertain tax positions. The Company would recognize, if applicable, interest accrued and penalties related to unrecognized tax benefits in interest expense and in accordance with the regulations of the jurisdictions involved. There were no such interest and penalty charges for the years ended December 31, 2011 or December 31, 2010. The Company remains subject to examination by state authorities for tax years 2008 through 2011 and by federal authorities for the tax years 2009 through 2011. During the second quarter of 2010, the Internal Revenue Service, or IRS, conducted an examination of the Company’s Federal income tax returns for 2007 and 2008. The IRS has proposed no changes to the 2007 consolidated corporate income tax return. The IRS made changes to the tax depreciation expense, which is related to the bonus depreciation calculation, on the 2008 consolidated corporate income tax return in the amount of approximately $1.9 million. This change does not constitute a disallowance of a deduction, but only a deferral of such deduction. The depreciation expense will be taken in subsequent years over the remaining tax lives of the applicable assets. This adjustment reduces the Net Operating Loss generated in 2008 by the same amount. The Company agrees with this change. 49 Table of Contents
Components of Income Tax Expense |  |
In thousands | For the Year Ended December 31, |
State income taxes |  | 2011 |  |  | 2010 |  |  | 2009 |
Current |  | $ | 106 |  |  | $ | 127 |  |  | $ | 64 |
Deferred |  |  | 994 |  |  |  | 984 |  |  |  | 996 |
Total state income tax expense |  | $ | 1,100 |  |  | $ | 1,111 |  |  | $ | 1,060 |
| For the Year Ended December 31, |
Federal income taxes |  |  | 2011 |  |  |  | 2010 |  |  |  | 2009 |
Current |  | $ | --- |  |  | $ | 823 |  |  | $ | 52 |
Deferred |  |  | 3,554 |  |  |  | 3,148 |  |  |  | 3,748 |
Total federal income tax expense |  | $ | 3,554 |  |  | $ | 3,971 |  |  | $ | 3,800 |
Reconciliation of effective tax rate: |
|  | For the Year Ended December 31, |
In thousands |  | 2011 |  |  | 2011 |  |  | 2010 |  |  | 2010 |  |  | 2009 |  |  | 2009 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
Reconciliation of effective tax rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income before federal and state income taxes |  | $ | 11,401 | % |  |  | 100.0 |  |  | $ | 12,702 | % |  |  | 100.0 |  |  | $ | 12,153 | % |  |  | 100.0 |
Amount computed at statutory rate |  |  | 3,876 |  |  |  | 34.0 |  |  |  | 4,319 |  |  |  | 34.0 |  |  |  | 4,132 |  |  |  | 34.0 |
Reconciling items |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State income tax-net of federal tax benefit |  |  | 711 |  |  |  | 6.2 |  |  |  | 726 |  |  |  | 5.7 |  |  |  | 683 |  |  |  | 5.6 |
Other |  |  | 67 |  |  |  | 0.6 |  |  |  | 37 |  |  |  | 0.3 |  |  |  | 45 |  |  |  | 0.4 |
Total income tax expense and effective rate |  | $ | 4,654 | % |  |  | 40.8 |  |  | $ | 5,082 | % |  |  | 40.0 |  |  | $ | 4,860 | % |  |  | 40.0 |
50 Table of Contents Deferred income taxes at December 31, 2011, 2010, and 2009 were comprised of the following:
|  | For the Year Ended December 31, |
In thousands |  | 2011 |  |  | 2010 |  |  | 2009 |
Deferred tax assets related to: |  |  |  |  |  |  |  |  |
Federal alternative minimum tax credit carry-forwards |  | $ | 3,688 |  |  | $ | 3,775 |  |  | $ | 2,547 |
Federal and state operating loss carry-forwards |  |  | 3,077 |  |  |  | 2,521 |  |  |  | 4,899 |
Bad debt allowance |  |  | 127 |  |  |  | 132 |  |  |  | 97 |
Valuation allowance |  |  | (53 | ) |  |  | (45 | ) |  |  | (37 | )
Stock options |  |  | 251 |  |  |  | --- |  |  |  | --- |
Other |  |  | 344 |  |  |  | 196 |  |  |  | 214 |
Total deferred tax assets |  | $ | 7,434 |  |  | $ | 6,579 |  |  | $ | 7,720 |
Deferred tax liabilities related to: |  |  |  |  |  |  |  |  |  |  |  |
Property plant and equipment basis differences |  | $ | (48,681 | ) |  | $ | (43,767 | ) |  | $ | (41,410 | )
Expenses of rate proceedings |  |  | (144 | ) |  |  | (18 | ) |  |  | (91 | )
Property taxes |  |  | (494 | ) |  |  | (470 | ) |  |  | (486 | )
Other |  |  | (619 | ) |  |  | (341 | ) |  |  | (249 | )
Total deferred tax liabilities |  | $ | (49,938 | ) |  | $ | (44,596 | ) |  | $ | (42,236 | )
Net deferred tax liability |  | $ | (42,504 | ) |  | $ | (38,017 | ) |  | $ | (34,516 | )
Deferred taxes, which are classified into a net current and non-current balance, are presented in the balance sheet as follows: |
Current deferred tax liability |  | $ | (772 | ) |  | $ | (459 | ) |  | $ | (439 | )
Non-current deferred tax liability |  |  | (41,732 | ) |  |  | (37,558 | ) |  |  | (34,077 | )
Net deferred tax liability |  | $ | (42,504 | ) |  | $ | (38,017 | ) |  | $ | (34,516 | )
Schedule of Valuation Allowance |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Additions |  |  |  |  |  |  |
|  | Balance at Beginning Of Period |  |  | Charged to Costs and Expenses |  |  | Deductions |  |  | Balance at End of Period |
In thousands |  |  |  |  |  |  |  |  |  |  |  |
Classification |  |  |  |  |  |  |  |  |  |  |  |
For the Year Ended December 31, 2011 Valuation allowance for deferred tax assets |  | $ | 45 |  |  | $ | 8 |  |  |  | --- |  |  | $ | 53 |
For the Year Ended December 31, 2010 Valuation allowance for deferred tax assets |  | $ | 37 |  |  | $ | 8 |  |  |  | --- |  |  | $ | 45 |
For the Year Ended December 31, 2009 Valuation allowance for deferred tax assets |  | $ | 71 |  |  |  | --- |  |  | $ | 34 |  |  | $ | 37 |
51 Table of Contents

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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 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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=6881521&loc=d3e23780-122690 + Details
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