Xcel Energy Inc.

Denver, CO: (Jun-20-07) Xcel Energy Inc. filed suit against the US government in April 2004 to establish the right to deduct the interest expense that it had accrued from 1993 to 1994 on policy loans related to insurance policies. The suit stemmed from a dispute over corporate-owned life insurance policies purchased on the lives of employees of Xcel subsidiary Public Service Company Of Colorado Inc. The Internal Revenue Service responded by sending Xcel a notice of deficiency for 1995 to 2002. The company continued to take deductions for interest expense on policy loans. Xcel claimed that the total exposure for the tax years in dispute and through 2007 was about $583 million, including income tax, interest and potential penalties.

In a settlement reached, Xcel agreed to pay $64.4 million for all the government's claims for additional tax, penalties, and interest relating to the insurance policies for 1993 to 2007. As part of the agreement, Xcel would agree not to claim any additional loan interest expense deductions from the policies after 2007 and would surrender the policies. Xcel, Colorado's largest utility, stated that the settlement costs after tax will be about $56 million. [DENVER BUSINESS JOURNAL: XCEL IRS TAX]

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Published on Jun-23-07