|
For The Years Ended December 31, 1997, 1996 and 1995
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Note 7. Income Taxes
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|
Income tax expense as presented in the Consolidated Statements of Income is summarized as
follows:
|
|
|
|
|
|
In Millions |
|
1997 |
|
1996 |
|
1995 |
|
|
|
|
|
Current income taxes |
|
|
|
|
|
|
|
|
|
|
|
Federal |
$ |
432.7 |
|
$ |
514.3 |
|
$ |
452.0 |
|
|
|
State |
|
100.5 |
|
|
108.8 |
|
|
97.0 |
|
|
|
|
|
|
|
Total current income taxes |
|
533.2 |
|
|
623.1 |
|
|
549.0 |
|
|
|
|
|
|
|
|
Deferred income taxes, net |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
111.9 |
|
|
73.1 |
|
|
105.2 |
|
|
|
State |
|
8.9 |
|
|
12.8 |
|
|
21.2 |
|
|
|
|
|
|
|
Total deferred income taxes, net |
|
120.8 |
|
|
85.9 |
|
|
126.4 |
|
|
|
|
|
|
|
|
Investment tax credit amortization |
|
( 15.1 |
) |
|
( 11.2 |
) |
|
( 11.2 |
) |
|
|
|
|
|
|
|
Total income tax expense |
$ |
638.9 |
|
$ |
697.8 |
|
$ |
664.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax differs from the amount computed by applying the federal income tax rate
of 35% to income before income taxes. The reasons for this difference are as follows:
|
|
|
|
|
|
In Millions |
|
1997 |
|
1996 |
|
1995 |
|
|
|
|
|
Income tax, computed at the statutory rate
|
$ |
564.7 |
|
$ |
626.1 |
|
$ |
588.8 |
|
|
|
Adjustments resulting from: |
|
|
|
|
|
|
|
|
|
|
|
State income tax, net of federal income tax effect
|
|
70.8 |
|
|
78.6 |
|
|
76.5 |
|
|
|
Other items, net |
|
3.4 |
|
|
( 6.9 |
) |
|
( 1.1 |
) |
|
|
|
|
|
|
Total income tax expense |
$ |
638.9 |
|
$ |
697.8 |
|
$ |
664.2 |
|
|
|
|
|
|
Effective tax rate |
|
39.6 |
% |
|
39.0 |
% |
|
39.5 |
% |
|
|
|
|
|
|
|
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|
The tax effects of temporary differences that resulted in deferred income tax assets and liabilities, and a description of the significant items that created these differences as of December 31, 1997 and 1996, are as follows:
|
|
|
|
|
|
|
|
|
|
Deferred credits and other liabilities |
$ |
408.4 |
|
$ |
418.2 |
|
|
|
Alternative minimum tax credit carryforward |
|
30.3 |
|
|
72.6 |
|
|
|
Other |
|
46.3 |
|
|
-- |
|
|
|
|
|
|
|
Total deferred income tax assets |
|
485.0 |
|
|
490.8 |
|
|
|
|
Valuation allowance and other tax reserves |
|
( 146.1 |
) |
|
( 141.1 |
) |
|
|
|
|
|
|
Net deferred income tax assets |
|
338.9 |
|
|
349.7 |
|
|
|
|
|
|
|
|
|
|
Investments and other assets |
|
( 263.1 |
) |
|
( 208.8 |
) |
|
|
Property, plant and equipment |
|
( 2,357.7 |
) |
|
( 2,268.7 |
) |
|
|
Regulatory assets and deferred debits |
|
( 623.2 |
) |
|
( 642.6 |
) |
|
|
Regulatory asset related to restating to pre-tax basis
|
|
( 437.8 |
) |
|
( 433.2 |
) |
|
|
Other |
|
-- |
|
|
( 5.9 |
) |
|
|
|
|
|
|
Total deferred income tax liabilities |
|
( 3,681.8 |
) |
|
( 3,559.2 |
) |
|
|
|
|
|
|
State deferred income tax, net of federal tax effect
|
|
( 363.6 |
) |
|
( 359.0 |
) |
|
|
|
|
|
|
Net deferred income tax liability |
$ |
( 3,706.5 |
) |
$ |
( 3,568.5 |
) |
|
|
|
|
|
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|
The alternative minimum tax credit carryforward can be carried forward indefinitely.
In 1990, PanEnergy established a provision for certain tax issues related to the purchase
of TEC, which resulted in an increase in goodwill and deferred income tax liability.
Following discussions with the Internal Revenue Service, PanEnergy revised its estimates
in 1995 and 1996 with respect to these issues. As a result, the related goodwill and deferred
income tax liability were reduced by approximately $40 million and $100 million in 1996 and
1995, respectively. If tax benefits relating to the valuation allowance for deferred income
tax assets and other tax reserves are recognized subsequent to December 31, 1997, approximately
$29.4 million will be allocated as an adjustment to goodwill.
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| Continue to Note 8. Financial Instruments and Risk Management |
| Back to Notes to Consolidated Financial Statements Table of Contents |
|