Notes to Consolidated Financial Statements

1. Description of TransCanada's Business
2. Accounting Policies
3. Accounting Changes
4. Segmented Information
5. Plant, Property and Equipment
6. Goodwill
7. Rate-Regulated Businesses
8. Joint Venture Investments
9. Intangibles and Other Assets
10. Notes Payable
11. Deferred Amounts
12. Income Taxes
13. Long-Term Debt
14. Long-Term Debt of Joint Ventures
15. Junior Subordinated Notes
16. Non-Controlling Interests
17. Common Shares
18. Preferred Shares
19. Asset Retirement Obligations
20. Employee Future Benefits
21. Risk Management and Financial Instruments
22. Changes in Operating Working Capital
23. Acquisitions and Dispositions
24. Commitments, Contingencies and Guarantees
25. United States Accounting Principles and Reporting

Note 12: Income Taxes

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Provision for Income Taxes

Year ended December 31 (millions of dollars) 2011 2010  2009 
Current      
Canada 211  29  (70)
Foreign (2) (170) 100 
  209  (141) 30 
       
Future      
Canada 138  170  339 
Foreign 226  351  18 
  364  521  357 
Income Tax Expense 573  380  387 

Geographic Components of Income

Year ended December 31 (millions of dollars) 2011 2010 2009
Canada 1,175 798 1,095
Foreign 1,109 969 768
Income before Income Taxes 2,284 1,767 1,863

Reconciliation of Income Tax Expense

Year ended December 31 (millions of dollars) 2011  2010  2009 
Income before Income Taxes 2,284  1,767  1,863 
Federal and provincial statutory tax rate 26.5% 28.0% 29.0%
Expected income tax expense 605  495  540 
Income tax differential related to regulated operations 42  39 
Lower effective foreign tax rates (5) (36) (63)
Tax rate and legislative changes –  –  (30)
Income from equity investments and non-controlling interests (45) (40) (37)
Other (24) (47) (62)
Actual Income Tax Expense 573  380  387 

Future Income Tax Assets and Liabilities

December 31 (millions of dollars) 2011 2010
Future Income Tax Assets    
Operating loss carryforwards 905 494
Financial instruments 163 108
Other post-employment benefits 74 75
Deferred amounts 49 42
Other 141 153
  1,332 872
Future Income Tax Liabilities    
Difference in accounting and tax bases of plant, equipment and PPAs 4,164 3,439
Taxes on future revenue requirement 299 321
Unrealized foreign exchange gains on long-term debt 133 161
Pension benefits 94 96
Other 107 77
  4,797 4,094
Net Future Income Tax Liabilities 3,465 3,222

The above future tax amounts have been classified in the Consolidated Balance Sheet as follows:

December 31 (millions of dollars) 2011 2010(1)
Future Income Tax Assets    
Other current assets 265 93
Intangibles and other assets (Note 9) 133 112
  398 205
Future Income Tax Liabilities    
Accounts payable 75 29
Future income taxes 3,788 3,398
  3,863 3,427
Net Future Income Tax Liabilities 3,465 3,222
(1) Amounts relating to deferred tax assets and liabilities as at December 31, 2010 have been reclassified to conform with current year's presentation.

At December 31, 2011, the Company has recognized the benefit of unused non-capital loss carryforwards of $450 million (2010 – $42 million) for federal and provincial purposes in Canada, which expire from 2014 to 2031.

At December 31, 2011, the Company has recognized the benefit of unused net operating loss carryforwards of US$2,119 million (2010 – US$1,320 million) for federal purposes in the U.S., which expire from 2028 to 2031.

Unremitted Earnings of Foreign Investments

Income taxes have not been provided on the unremitted earnings of foreign investments that the Company does not intend to repatriate in the foreseeable future. Future income tax liabilities would have increased at December 31, 2011 by approximately $136 million (2010 – $105 million) if there had been a provision for these taxes.

Income Tax Payments

Income tax refunds of $84 million, net of payments made, were received in 2011 (2010 – payments, net of refunds, of $53 million; 2009 – payments, net of refunds, of $83 million).