DTE Energy 2007 Annual Report Download - page 19

Other
On September 6, 2007, the Court of Appeals of the State of Michigan published its decision with respect to an appeal by MichCon and
others of certain provisions of a November 23, 2004 MPSC order, including reversing the MPSC’ s denial of recovery of merger
control premium costs. In its published decision, the Court of Appeals held that MichCon is entitled to recover its allocated share of
the merger control premium and remanded this matter to the MPSC for further proceedings to establish the precise amount and timing
of this recovery. Other parties have filed requests for leave to appeal to the Michigan Supreme Court from the Court of Appeals
September 6, 2007 decision. However, proceedings resulting from this remand cannot be initiated by the MPSC until appeals by other
parties of the September 6, 2007 decision have been resolved by the Michigan Supreme Court. Any potential recovery mechanism
cannot be effective until the conclusion of the next general rate case which by agreement of MichCon and the MPSC in a separate
proceeding cannot begin before January 1, 2009, or at the conclusion of the ordered remand proceeding which has not yet been
initiated by the MPSC. MichCon is unable to predict the financial or other outcome of any such legal or regulatory proceedings at this
time.
We are unable to predict the outcome of the regulatory matters discussed herein. Resolution of these matters is dependent upon future
MPSC orders and appeals, which may materially impact the financial position, results of operations and cash flows of the Company.
NOTE 5 – INCOME TAXES
Income Tax Summary
We are part of the consolidated federal income tax return of DTE Energy. Our federal income tax expense is determined on an
individual company basis with no allocation of tax benefits or expenses from other affiliates of DTE Energy. We have an income tax
payable of $10 million at December 31, 2007, and $4 million at December 31, 2006 due to DTE Energy.
Total income tax expense (benefit) varied from the statutory federal income tax rate for the following reasons:
(Dollars in Millions) 2007 2006 2005
Income tax expense at 35% statutory rate $ 33 $ 22 $ —
Investment tax credit (1) (1) (1)
Depreciation (7) (7) (7)
Employee Stock Ownership Plan dividends (1) (1) (1)
Medicare part D subsidy (1) (1) (2)
Other, net — — (3)
Total $ 23 $ 12 $ (14)
Effective federal income tax rate 24.5% 18.8% (n/m)(1)%
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(1) – Due to the amount of the pre-tax loss in 2005, the effective tax rate in not meaningful (n/m).
Components of income tax expense (benefit) were as follows:
(in Millions) 2007 2006 2005
Current federal and other income tax expense (benefit) $ 16 $ 47 $ (14)
Deferred federal and other income tax expense 7 (35) —
Total $ 23 $ 12 $ (14)
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of
assets or liabilities and the reported amounts in the financial statements. Deferred tax assets and liabilities are classified as current or
noncurrent according to the classification of the related assets or liabilities. Deferred tax assets and liabilities not related to assets or
liabilities are classified according to the expected reversal date of the temporary differences.
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