DTE Energy 2012 Annual Report Download - page 86

Table of Contents


Company believes that it is possible that there will be a decrease in unrecognized tax benefits of up to $ 1 million within the next twelve months.
The Company recognizes interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on its Consolidated
Statements of Operations. Accrued interest pertaining to income taxes totaled $ 1 million and $2 million at December 31, 2012 and December 31, 2011,
respectively. The Company had no accrued penalties pertaining to income taxes. The Company recognized interest expense (income) related to income taxes of
$(1) million, $(2) million and $1 million in 2012, 2011 and 2010, respectively.
In 2012, the Company settled a federal tax audit for the 2009 and 2010 tax years, which resulted in the recognition of $ 30 million of unrecognized tax
benefits. The Company's federal income tax returns for 2011 and subsequent years remain subject to examination by the IRS. The Company's Michigan
Business Tax returns for the year 2008 and subsequent years remain subject to examination by the State of Michigan. The Company also files tax returns in
numerous state and local jurisdictions with varying statutes of limitation.
Michigan Corporate Income Tax (MCIT)
On May 25, 2011, the Michigan Business Tax (MBT) was repealed and the MCIT was enacted and became effective January 1, 2012. The MCIT
subjects corporations with business activity in Michigan to a 6 percent tax rate on an apportioned income tax base and eliminates the modified gross receipts
tax and nearly all credits available under the MBT. The MCIT also eliminated the future deductions allowed under MBT that enabled companies to establish a
one-time deferred tax asset upon enactment of the MBT to offset deferred tax liabilities that resulted from enactment of the MBT.
As a result of the enactment of the MCIT, the net state deferred tax liability was remeasured to reflect the impact of the MCIT tax rate on cumulative
temporary differences expected to reverse after the effective date. The net impact of this remeasurement was a decrease in deferred income tax liabilities of $ 36
million attributable to our regulated utilities that was offset against the regulatory asset established upon the enactment of the MBT. Due to the elimination of
the future tax deductions allowed under the MBT, the one-time MBT deferred tax asset that was established upon the enactment of the MBT has been
remeasured to zero. The net impact of this remeasurement is a reduction of the net deferred tax assets of $ 308 million, with $395 million of this decrease in
deferred tax assets attributable to our regulated utilities, partially offset by an $ 87 million decrease in deferred tax liabilities attributable to our non-utilities. The
$395 million decrease in deferred tax assets at our regulated utilities was offset against the regulatory liabilities established upon enactment of the MBT. The
$87 million is primarily due to a lower apportionment factor from inclusion of non-utility entities in DTE Energy's unitary Michigan tax return and was
recognized as a reduction to income tax expense in 2011.
Consistent with the original establishment of these deferred tax liabilities (assets), no recognition of these non-cash transactions have been reflected in the
Consolidated Statements of Cash Flows.

Common Stock
On June 18, 2012, the Company contributed $ 80 million of DTE Energy common stock to the DTE Energy Company Affiliates Employee Benefit
Plans Master Trust. The common stock was valued using the closing market price of DTE Energy common stock on that date in accordance with fair value
measurement and accounting requirements.
In March 2010, the Company contributed $ 100 million of DTE Energy common stock to the DTE Energy Company Affiliates Employee Benefit Plans
Master Trust. The common stock was contributed over four business days from March 26, 2010 through March 31, 2010 and was valued using the closing
market prices of DTE Energy common stock on each of those days in accordance with fair value measurement and accounting requirements.
Under the DTE Energy Company Long-Term Incentive Plan, the Company grants non-vested stock awards to key employees, primarily management.
As a result of a stock award, a settlement of an award of performance shares, or by exercise of a participant’s stock option, the Company may deliver
common stock from the Company’s authorized but unissued common stock and/or from outstanding common stock acquired by or on behalf of the
Company in the name of the participant.
Dividends
84