DTE Energy 2008 Annual Report Download - page 21

The above table excludes unamortized investment tax credits of $11 million and $13 million at December 31, 2008 and 2007, respectively.
Uncertain Tax Positions
We adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (FIN 48)
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. The
changes in unrecognized tax benefits during 2007 were not material. A reconciliation of the 2008 beginning and ending amount of
unrecognized tax benefits is as follows:
Unrecognized tax benefits at December 31, 2008, if recognized, would not have a significant impact on our effective rate. During the next
twelve months, it is reasonably possible that DTE Energy and its subsidiaries will settle certain federal tax audits. There are no anticipated
changes in the unrecognized tax benefits for the Company.
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 December 31, 2007 and
December 31, 2008. We had no interest expense in relation to income tax for the years ended December 31, 2008 and 2007.
The U.S. federal income tax returns for years 2004 and subsequent years remain subject to examination by the IRS for DTE Energy and its
subsidiaries. The Michigan Business Tax for the year 2008 is subject to examination by the State of Michigan for DTE Energy and its
subsidiaries. The Company also files tax returns in various local tax jurisdictions with varying statutes of limitations.
M
ichigan Business Tax
In July 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 is 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 of the MBT
did not have an impact on our income tax provision for 2007.
The 2007 state deferred tax liability was increased in 2008 by $6 million to $53 million to reflect changes in federal income tax temporary
differences primarily due to an approved IRS change in accounting method for the Company for tax year 2007. The related one-time deferred
tax asset for the tax deduction created for businesses that realize an increase in their deferred tax liability due to enactment of the MBT was
also increased by $6 million to $53 million. The corresponding regulatory assets and liabilities were also increased by $6 million to $53 million
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.
In 2008 the state deferred tax liability increased by $5 million to $58 million as of December 31, 2008 and the related regulatory asset
increased to $58 million as of December 31, 2008.
19
(in Millions) 2008
Balance at January 1 $ —
Additions for tax positions of current years 11
Balance at December 31 $11