
	2020		2019		2018
SJI (includes SJG and all other consolidated subsidiaries):
Tax at Statutory Rate	$	37,791	$	20,633	$	3,877
Increase (Decrease) Resulting from:
State Income Taxes	7,896		7,813		622
State Valuation Allowance	7,392		—		—
ESOP Dividend	(627)		(697)		(791)
Tax Reform Adjustments	—		—		(588)

AFUDC	(1,901)		(1,546)		(1,835)
Amortization of Excess Deferred Taxes	(6,174)		(3,475)		(893)


Investment and Other Tax Credits	(23,439)		(953)		(93)
Other - Net	1,726		(714)		262
Income Taxes:
Continuing Operations	22,664		21,061		561
Discontinued Operations	(66)		(70)		(62)
Total Income Tax Expense	$	22,598	$	20,991	$	499

SJG:
Tax at Statutory Rate	30,111		25,245		22,966
Increase (Decrease) Resulting from:
State Income Taxes	8,965		9,542		5,220
ESOP Dividend	(533)		(592)		(712)
AFUDC	(821)		(591)		(1,126)
Amortization of Excess Deferred Taxes	(3,154)		—		—
Other - Net	756		(782)		65
Total Income Tax Expense	35,324		32,822		26,413

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

SJI (includes SJG and all other consolidated subsidiaries):	2020		2019		2018
Current:
Federal	$	—	$	—	$	(13,790)
State	823		(482)		3,959
Total Current	823		(482)		(9,831)
Deferred:
Federal	3,312		11,171		13,564
State	18,529		10,372		(3,172)
Total Deferred	21,841		21,543		10,392

Income Taxes:
Continuing Operations	22,664		21,061		561
Discontinued Operations	(66)		(70)		(62)
Total Income Tax Expense (Benefit)	$	22,598	$	20,991	$	499

SJG:
Current:
Federal	$	—	$	—	$	(12,766)
State	—		—		—
Total Current	—		—		(12,766)
Deferred:
Federal	23,976		20,744		32,571
State	11,348		12,078		6,608
Total Deferred	35,324		32,822		39,179

Total Income Tax Expense	$	35,324	$	32,822	$	26,413

For the year ended December 31, 2020, the change in SJI Income tax expense in 2020 compared with 2019 increased primarily due to an increase in income before income taxes in 2020 compared with the prior year along with the valuation allowance discussed below. These were partially offset with the benefits from ITC recorded on the assets of recently acquired fuel cell and solar projects that commenced operations in 2020 (see Note 1 to the consolidated financial statements). For the years ended 2019 and 2018, changes in SJI tax expense correlated with changes in income before income taxes. For the years ended 2020, 2019 and 2018, changes in SJG tax expense correlated with changes in income before income taxes.

TAX REFORM - On December 22, 2017, Tax Reform was enacted into law, changing various corporate income tax provisions within the existing Internal Revenue Code. The law became effective January 1, 2018 but was required to be accounted for in the period of enactment, as such SJI adopted the new requirements in the fourth quarter of 2017. SJI and SJG were impacted in several ways as a result of Tax Reform, including provisions related to the permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, modification of bonus depreciation and changes to the deductibility of certain business related expenses. As of December 31, 2018, SJI and SJG consider the impacts of Tax Reform to be complete. While we still expect additional guidance from the U.S. Department of the Treasury and the IRS, we have finalized our calculations using available guidance. Any additional issued guidance or future actions of our regulators could potentially affect the final determination of the accounting effects rising from the implementation of Tax Reform.

On September 14, 2020, the IRS issued final and proposed regulations that allow all interest expense of a consolidated group to be deductible as long as a public utility comprises of at least 90% of the total consolidated business. Under the proposed regulations, SJI expects to meet the de mininis safe harbor rule in 2020, 2019 and 2018 and, therefore, the full amount of SJI's consolidated interest expense would be deductible in each of those years.

CARES ACT - Given the impact that COVID-19 has had on the economy, on March 27, 2020 the President signed into law the CARES Act, an economic stimulus package in response to the COVID-19 global pandemic, as a way to provide relief to both businesses and individuals affected by the virus. The CARES Act contains several corporate tax provisions that impacted SJI and SJG, including deferring payments on social security taxes for employees and other employee retention credits. These impacts of the CARES Act, and these provisions, did not have a material effect on income tax expense or deferred tax assets/liabilities.

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):	2020		2019
Deferred Tax Assets:
Net Operating Loss Carryforward	$	141,252	$	122,197
Investment and Other Tax Credits	243,827		215,033
Conservation Incentive Program	—		1,991
Deferred State Tax	24,338		18,514
Income Taxes Recoverable Through Rates	92,739		103,922
Pension & Other Post Retirement Benefits	34,558		28,579
Deferred Revenues	4,530		5,324
Deferred Regulatory Costs	—		11,895
Provision for Uncollectibles	8,763		4,749
Other	17,691		16,705
Total Deferred Tax Asset	567,698		528,909
Valuation Allowance	(7,392)		—
Total Deferred Tax Asset, net of Valuation Allowance	$	560,306	$	528,909
Deferred Tax Liabilities:
Book versus Tax Basis of Property	$	512,357	$	479,765
Deferred Gas Costs - Net	13,737		23,728
Derivatives / Unrealized Gain	1,215		1,098
Environmental Remediation	50,262		53,511
Deferred Regulatory Costs	13,360		—
Budget Billing - Customer Accounts	5,248		5,400
Deferred Pension & Other Post Retirement Benefits	33,307		31,416
Conservation Incentive Program	6,178		—
Equity In Loss Of Affiliated Companies	16,019		1,801
Goodwill Amortization	28,013		16,304
Other	8,977		8,052


Total Deferred Tax Liability	$	688,673	$	621,075
Deferred Tax Liability - Net	$	128,367	$	92,166

SJG:
Deferred Tax Assets:
Net Operating Loss and Tax Credits	$	35,301	$	55,250
Deferred State Tax	22,918		20,352
Provision for Uncollectibles	4,887		3,939
Conservation Incentive Program	—		1,991
Income Taxes Recoverable Through Rates	58,573		68,280
Pension & Other Post Retirement Benefits	20,857		17,461
Deferred Revenues	4,739		5,525
Other	2,813		2,486
Total Deferred Tax Assets	$	150,088	$	175,284

Deferred Tax Liabilities:
Book Versus Tax Basis of Property	$	435,764	$	418,059
Deferred Fuel Costs - Net	10,189		20,227
Environmental Remediation	46,857		47,270
Deferred Regulatory Costs	15,087		9,609
Deferred Pension & Other Post Retirement Benefits	21,398		20,396
Budget Billing - Customer Accounts	5,248		5,400
Section 461 Prepayments	1,469		1,445
Conservation Incentive Program	6,178		—
Other	11,507		10,515
Total Deferred Tax Liabilities	$	553,697	$	532,921

Deferred Tax Liability - Net	$	403,609	$	357,637

SJG is included in the consolidated federal income tax return filed by SJI. The actual taxes, including credits, are allocated by SJI to its subsidiaries, generally on a separate return basis except for net operating loss and credit carryforwards. As of December 31, 2020 and 2019, there were no income taxes due to or from SJI.


	Net Operating Loss Carryforwards
Expire in:	Federal		State
2031	$	—	$	9,653
2032	14,740		3,108
2033	57,363		18,557
2034	106,899		12,779
2035	51,308		22,472
2036	72,199		147,081
2037	75,606		96,697
2038	—		127,846
2039	—		130,397
2040	—		71,188
Indefinite	70,973		—
	$	449,088	$	639,778

SJI and SJG also have federal research and development credits of $6.2 million and $3.0 million, respectively, which will expire between 2031 and 2039. SJI and SJG have state credits of $4.4 million and $2.5 million, respectively, that will expire between 2025 and 2040.

As of December 31, 2020 and 2019, SJG has total federal net operating loss carryforwards of $67.7 million and $156.8 million, respectively, that will expire between 2036 and 2037. As of December 31, 2020 and 2019, SJG has a state net operating loss carryforward of $212.8 million and $246.0 million, respectively, that will expire between 2036 and 2039.

A valuation allowance is recorded when it is more likely than not that any of SJI's or SJG's deferred tax assets will not be realized. As of December 31, 2020, SJI recorded a valuation allowance of $7.4 million related to certain state net operating loss and state credit carryforwards expected to expire prior to being fully utilized. SJG believes that they will generate sufficient future taxable income to realize the income tax benefits related to their net deferred tax assets.


SJI (includes SJG and all other consolidated subsidiaries):	2020		2019		2018
Balance at January 1,	$	1,566	$	1,147	$	1,445
Increase as a result of tax positions taken in prior years	806		419		—

Decrease in prior year positions	—		—		(298)
Balance at December 31,	$	2,372	$	1,566	$	1,147

SJG:
Balance at January 1,	$	1,104	$	1,063	$	1,361
Increase as a result of tax position taken in prior years	25		41		—
Decrease in prior year positions	—		—		(298)
Balance at December 31,	$	1,129	$	1,104	$	1,063

The total unrecognized tax benefits reflected in the table above exclude $0.9 million, $0.8 million and $0.8 million of accrued interest and penalties for each of the years ended December 31, 2020, 2019 and 2018 for both SJI and SJG. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is not significant. The Company's policy is to record interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively. These amounts were not significant in 2020, 2019 or 2018. The majority of the increased tax position in 2020 and 2019 is attributable to research and development credits. The Company does not anticipate any significant changes in the total unrecognized tax benefits within the next 12 months.