DTE Energy 2007 Annual Report Download - page 20

Deferred income tax assets (liabilities) were comprised of the following at December 31:
(in Millions) 2007 2006
Property, plant and equipment $ (114) $ (107)
Pension and benefits (86) (85)
Other comprehensive income (OCI) 1 1
Other, net 20 31
$ (179) $ (160)
Current deferred income tax assets (included in Current Assets – Other) $ 16 $ 21
Long term deferred income tax liabilities (195) (181)
$ (179) $ (160)
Deferred income tax liabilities $ (595) $ (553)
Deferred income tax assets 416 393
$ (179) $ (160)
The above table excludes deferred tax liabilities associated with unamortized investment tax credits.
Uncertain Tax Positions
We adopted the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109
on January 1, 2007. This interpretation prescribes a more-likely-than-not recognition threshold and a measurement attribute for the
financial statement reporting of tax positions taken or expected to be taken on a tax return. As a result of the implementation of FIN
48, we recognized an increase in liabilities that was accounted for as a reduction to the January 1, 2007 balance of retained earnings in
an immaterial amount.
Unrecognized tax benefits at January 1, 2007 and December 31, 2007, and changes therein during 2007, were not material.
Unrecognized tax benefits at January 1, 2007 and at December 31, 2007, if recognized, would not favorably impact our effective tax
rate. We do not anticipate any significant changes in the unrecognized tax benefits during the next twelve months.
We recognize interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on our
Consolidated Statements of Operations. We had no accrued interest and no accrued penalties pertaining to income taxes at January 1,
2007 and December 31, 2007. We had no interest expense in relation to income tax for the years ended December 31, 2007 and 2006.
The U.S. federal income tax returns for years 2004 and subsequent years remain subject to examination by the IRS for DTE Energy
Company and its subsidiaries. The Company also files tax returns in various local tax jurisdictions with varying statutes of limitations.
Michigan Business Tax
On July 12, 2007, the Michigan Business Tax (MBT) was enacted by the State of Michigan to replace the Michigan Single Business
Tax (MSBT) effective January 1, 2008. The MBT is comprised of an apportioned modified gross receipts tax of 0.8 percent and an
apportioned business income tax of 4.95 percent. The MBT provides credits for Michigan business investment, compensation, and
research and development. The MBT will be accounted for as an income tax.
In 2007, a state deferred tax liability of $47 million was recognized by the Company for cumulative differences between book and tax
assets and liabilities. Effective September 30, 2007, legislation was adopted by the State of Michigan creating a deduction for
businesses that realize an increase in their deferred tax liability due to the enactment of the MBT. Therefore, a deferred tax asset of
$47 million was established related to the future deduction. The deduction will be claimed during the period of 2015 through 2029.
The recognition of the enactment did not have an impact on our income tax provision for 2007.
The $47 million of deferred tax liabilities and assets recognized were offset by corresponding regulatory assets and liabilities in
accordance with SFAS No. 71, Accounting for the Effects of Certain Types of Regulation, as the impacts of the deferred tax liabilities
and assets recognized upon enactment and amendment of the MBT will be reflected in our rates.
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