INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of components of income tax expense (benefit) and effective income tax rate reconciliation

Total income taxes applicable to operations differ from the tax that would have resulted by applying the statutory Federal income tax rate to pre-tax income for SJI and SJG for the following reasons (in thousands):



	2017			2016			2015
SJI (includes SJG and all other consolidated subsidiaries):
Tax at Statutory Rate	$	(9,915	)	$	60,624		$	37,440
Increase (Decrease) Resulting from:
State Income Taxes	2,778			6,438			3,985
ESOP Dividend	(1,314		)	(1,300		)	(1,298		)
Tax Reform Adjustments	(13,521		)	—			—
Amortization of Investment Tax Credits - Utility	—			—			(149		)
AFUDC	(3,094		)	(900		)	(1,109		)
Investment and Other Tax Credits	(666		)	(10,706		)	(37,503		)
Other - Net	795			(5		)	(6		)



Income Taxes:
Continuing Operations	(24,937		)	54,151			1,360
Discontinued Operations	(173		)	(133		)	(257		)
Total Income Tax (Benefit) Expense	$	(25,110	)	$	54,018		$	1,103

SJG:
Tax at Statutory Rate	41,390			37,944			36,233
Increase (Decrease) Resulting from:
State Income Taxes	5,955			4,096			4,584
Amortization of Investment Tax Credits	—			—			(149		)
ESOP Dividend	(1,182		)	(1,170		)	(1,168		)
AFUDC	(1,446		)	(900		)	(1,109		)
Research and Development Credits	—			(613		)	(1,400		)
Other - Net	983			9			(46		)
Total Income Tax Expense	45,700			39,366			36,945

The provision for Income Taxes is comprised of the following (in thousands):

SJI (includes SJG and all other consolidated subsidiaries):	2017			2016			2015
Current:
Federal	$	(34,971	)	$	—		$	—
State	(48		)	(1,638		)	(2,352		)
Total Current	(35,019		)	(1,638		)	(2,352		)
Deferred:
Federal	5,761			44,246			(4,622		)
State	4,321			11,543			8,483
Total Deferred	10,082			55,789			3,861
Investment Tax Credit - Utility	—			—			(149		)
Income Taxes:
Continuing Operations	(24,937		)	54,151			1,360
Discontinued Operations	(173		)	(133		)	(257		)
Total Income Tax (Benefit) Expense	$	(25,110	)	$	54,018		$	1,103

SJG:
Current:
Federal	(33,012		)	—			—
State	—			(1,614		)	(2,203		)
Total Current	$	(33,012	)	$	(1,614	)	$	(2,203	)
Deferred:
Federal	69,550			33,064			30,042
State	9,162			7,916			9,255
Total Deferred	$	78,712		$	40,980		$	39,297
Investment Tax Credits	—			—			(149		)
Total Income Tax Expense	$	45,700		$	39,366		$	36,945

Schedule of deferred tax assets and liabilities

The net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes resulted in the following net deferred tax assets and liabilities for SJI and SJG at December 31 (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	2017		2016
Deferred Tax Assets:
Net Operating Loss Carryforward	$	152,541	$	211,004
Investment and Other Tax Credits	214,605		213,946
Derivatives / Unrealized Gain	2,068		—
Conservation Incentive Program	—		—
Deferred State Tax	16,905		28,833
Gross Up of Excess Deferred Taxes	76,426		—
Pension & Other Post Retirement Benefits	16,624		19,351
Deferred Revenues	5,726		7,669
Provision for Uncollectibles	3,854		5,231
Other	1,949		8,368
Total Deferred Tax Asset	$	490,698	$	494,402
Deferred Tax Liabilities:
Book versus Tax Basis of Property	$	486,854	$	732,535
Deferred Gas Costs - Net	10,254		2,052
Derivatives / Unrealized Loss	—		1,794
Environmental Remediation	31,393		32,885
Deferred Regulatory Costs	3,554		1,554
Budget Billing - Customer Accounts	4,043		3,347
Deferred Pension & Other Post Retirement Benefits	21,349		34,432
Conservation Incentive Program	7,721		11,846
Equity In Loss Of Affiliated Companies	1,377		3,092
Other	11,037		14,414
Total Deferred Tax Liability	$	577,582	$	837,951
Deferred Tax Liability - Net	$	86,884	$	343,549

SJG:
Deferred Tax Assets:
Net Operating Loss and Tax Credits	$	73,785	$	102,290
Deferred State tax	14,688		24,574
Provision for Uncollectibles	3,811		5,170
Gross Up of Excess Deferred Taxes	76,426		—
Pension & Other Post Retirement Benefits	15,031		17,264
Deferred Revenues	6,066		7,696
Other	2,413		3,573
Total Deferred Tax Assets	$	192,220	$	160,567

Deferred Tax Liabilities:
Book Versus Tax Basis of Property	$	386,642	$	532,330
Deferred Fuel Costs - Net	10,254		2,052
Environmental Remediation	31,637		33,573
Deferred Regulatory Costs	3,554		1,554
Deferred Pension & Other Post Retirement Benefits	21,349		34,432
Budget Billing - Customer Accounts	4,043		3,347
Section 461 Prepayments	866		1,147
Conservation Incentive Program	7,721		11,846
Other	6,900		9,694
Total Deferred Tax Liabilities	$	472,966	$	629,975

Deferred Tax Liability - Net	$	280,746	$	469,408

Summary of operating loss carryforward

As of December 31, 2017, SJI has the following federal and state net operating loss carryforwards (in thousands):



	Net Operating Loss Carryforwards
Expire in:	Federal		State
2031	$	163,572	$	45,866
2032	42,988		19,356
2033	56,007		35,271
2034	105,763		28,853
2035	49,572		9,956
2036	72,199		181,189
2037	96,326		74,175
	$	586,427	$	394,666

Summary of tax credit carryforwards

As of December 31, 2017, SJI has the following investment tax credit carryforwards (in thousands):



Expire in:	Investment Tax Credit Carryforward
2030	$	11,628
2031	25,664
2032	32,031
2033	45,606
2034	37,699
2035	45,005
2036	11,744
2037	636
	$	210,013

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, is as follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	2017		2016		2015
Balance at January 1,	$	1,445	$	559	$	552
Increase as a result of tax positions taken in prior years	—		886		7
Balance at December 31,	$	1,445	$	1,445	$	559

SJG:
Balance at January 1,	$	1,361	$	559	$	552
Increase as a result of tax position taken in prior years	—		802		7
Balance at December 31,	$	1,361	$	1,361	$	559

South Jersey Gas Company

Schedule of components of income tax expense (benefit) and effective income tax rate reconciliation



	2017			2016			2015
SJI (includes SJG and all other consolidated subsidiaries):
Tax at Statutory Rate	$	(9,915	)	$	60,624		$	37,440
Increase (Decrease) Resulting from:
State Income Taxes	2,778			6,438			3,985
ESOP Dividend	(1,314		)	(1,300		)	(1,298		)
Tax Reform Adjustments	(13,521		)	—			—
Amortization of Investment Tax Credits - Utility	—			—			(149		)
AFUDC	(3,094		)	(900		)	(1,109		)
Investment and Other Tax Credits	(666		)	(10,706		)	(37,503		)
Other - Net	795			(5		)	(6		)



Income Taxes:
Continuing Operations	(24,937		)	54,151			1,360
Discontinued Operations	(173		)	(133		)	(257		)
Total Income Tax (Benefit) Expense	$	(25,110	)	$	54,018		$	1,103

SJG:
Tax at Statutory Rate	41,390			37,944			36,233
Increase (Decrease) Resulting from:
State Income Taxes	5,955			4,096			4,584
Amortization of Investment Tax Credits	—			—			(149		)
ESOP Dividend	(1,182		)	(1,170		)	(1,168		)
AFUDC	(1,446		)	(900		)	(1,109		)
Research and Development Credits	—			(613		)	(1,400		)
Other - Net	983			9			(46		)
Total Income Tax Expense	45,700			39,366			36,945

The provision for Income Taxes is comprised of the following (in thousands):

SJI (includes SJG and all other consolidated subsidiaries):	2017			2016			2015
Current:
Federal	$	(34,971	)	$	—		$	—
State	(48		)	(1,638		)	(2,352		)
Total Current	(35,019		)	(1,638		)	(2,352		)
Deferred:
Federal	5,761			44,246			(4,622		)
State	4,321			11,543			8,483
Total Deferred	10,082			55,789			3,861
Investment Tax Credit - Utility	—			—			(149		)
Income Taxes:
Continuing Operations	(24,937		)	54,151			1,360
Discontinued Operations	(173		)	(133		)	(257		)
Total Income Tax (Benefit) Expense	$	(25,110	)	$	54,018		$	1,103

SJG:
Current:
Federal	(33,012		)	—			—
State	—			(1,614		)	(2,203		)
Total Current	$	(33,012	)	$	(1,614	)	$	(2,203	)
Deferred:
Federal	69,550			33,064			30,042
State	9,162			7,916			9,255
Total Deferred	$	78,712		$	40,980		$	39,297
Investment Tax Credits	—			—			(149		)
Total Income Tax Expense	$	45,700		$	39,366		$	36,945

Schedule of deferred tax assets and liabilities



SJI (includes SJG and all other consolidated subsidiaries):	2017		2016
Deferred Tax Assets:
Net Operating Loss Carryforward	$	152,541	$	211,004
Investment and Other Tax Credits	214,605		213,946
Derivatives / Unrealized Gain	2,068		—
Conservation Incentive Program	—		—
Deferred State Tax	16,905		28,833
Gross Up of Excess Deferred Taxes	76,426		—
Pension & Other Post Retirement Benefits	16,624		19,351
Deferred Revenues	5,726		7,669
Provision for Uncollectibles	3,854		5,231
Other	1,949		8,368
Total Deferred Tax Asset	$	490,698	$	494,402
Deferred Tax Liabilities:
Book versus Tax Basis of Property	$	486,854	$	732,535
Deferred Gas Costs - Net	10,254		2,052
Derivatives / Unrealized Loss	—		1,794
Environmental Remediation	31,393		32,885
Deferred Regulatory Costs	3,554		1,554
Budget Billing - Customer Accounts	4,043		3,347
Deferred Pension & Other Post Retirement Benefits	21,349		34,432
Conservation Incentive Program	7,721		11,846
Equity In Loss Of Affiliated Companies	1,377		3,092
Other	11,037		14,414
Total Deferred Tax Liability	$	577,582	$	837,951
Deferred Tax Liability - Net	$	86,884	$	343,549

SJG:
Deferred Tax Assets:
Net Operating Loss and Tax Credits	$	73,785	$	102,290
Deferred State tax	14,688		24,574
Provision for Uncollectibles	3,811		5,170
Gross Up of Excess Deferred Taxes	76,426		—
Pension & Other Post Retirement Benefits	15,031		17,264
Deferred Revenues	6,066		7,696
Other	2,413		3,573
Total Deferred Tax Assets	$	192,220	$	160,567

Deferred Tax Liabilities:
Book Versus Tax Basis of Property	$	386,642	$	532,330
Deferred Fuel Costs - Net	10,254		2,052
Environmental Remediation	31,637		33,573
Deferred Regulatory Costs	3,554		1,554
Deferred Pension & Other Post Retirement Benefits	21,349		34,432
Budget Billing - Customer Accounts	4,043		3,347
Section 461 Prepayments	866		1,147
Conservation Incentive Program	7,721		11,846
Other	6,900		9,694
Total Deferred Tax Liabilities	$	472,966	$	629,975

Deferred Tax Liability - Net	$	280,746	$	469,408

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, is as follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	2017		2016		2015
Balance at January 1,	$	1,445	$	559	$	552
Increase as a result of tax positions taken in prior years	—		886		7
Balance at December 31,	$	1,445	$	1,445	$	559

SJG:
Balance at January 1,	$	1,361	$	559	$	552
Increase as a result of tax position taken in prior years	—		802		7
Balance at December 31,	$	1,361	$	1,361	$	559