Accounting For Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Accounting for Income Taxes

NOTE 12. ACCOUNTING FOR INCOME TAXES

Income Tax Expense

Income tax expense consisted of the following for the years ended December 31 (dollars in thousands):

	2020			2019		2018
Current income tax expense (benefit)	$	(37,913	)	$	16,276	$	17,490
Deferred income tax expense		44,964			15,098		8,570
Total income tax expense	$	7,051		$	31,374	$	26,060

State income taxes do not represent a significant portion of total income tax expense on the Consolidated Statements of Income for any periods presented.

A reconciliation of federal income taxes derived from statutory federal tax rate of 21 percent applied to income before income taxes as set forth in the accompanying Consolidated Statements of Income is as follows for the years ended December 31 (dollars in thousands):

	2020					2019					2018
Federal income taxes at statutory rates	$	28,673		21.0	%	$	47,909		21.0	%	$	34,158		21.0	%
Increase (decrease) in tax resulting from:
Tax effect of regulatory treatment of utility    plant differences		(12,893	)	(9.4	)		(9,967	)	(4.3	)		(8,153	)	(5.0	)
State income tax expense		814		0.6			1,465		0.6			1,191		0.7
Acquisition costs		—		—			(1,712	)	(0.7	)		329		0.2
Non-plant excess deferred turnaround		(8,476	)	(6.2	)		(5,690	)	(2.5	)		—		—
Tax loss on sale of METALfx		—		—			(1,272	)	(0.6	)		—		—
Customer refunds related to prior years at 35 percent		(1,189	)	(0.9	)		—		—			—		—
Other		122		0.1			641		0.3			(1,465	)	(0.9	)
Total income tax expense	$	7,051		5.2	%	$	31,374		13.8	%	$	26,060		16.0	%

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in thousands):

	2020			2019
Deferred income tax assets:
Regulatory liabilities	$	179,871		$	181,455
Tax credits and NOL carryforwards		57,516			22,331
Provisions for pensions		37,501			41,648
Other		42,641			36,542
Total gross deferred income tax assets		317,529			281,976
Valuation allowances for deferred tax assets		(10,021	)		(16,551	)
Total deferred income tax assets after valuation allowances		307,508			265,425
Deferred income tax liabilities:
Utility property, plant, and equipment		666,639			581,387
Regulatory assets		232,697			210,231
Other		2,884			2,320
Total deferred income tax liabilities		902,220			793,938
Net long-term deferred income tax liability	$	594,712		$	528,513

The presentation of the December 31, 2019 deferred income tax assets and liabilities has been changed to reflect the group balances based on balance sheet captions of the underlying deferred tax.

The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized.

As of December 31, 2020, the Company had $18.3 million of state tax credit carryforwards. Of the total amount, the Company believes that it is more likely than not that it will only be able to utilize $8.6 million of the state tax credits. As such, the Company has recorded a valuation allowance of $9.7 million against the state tax credit carryforwards and reflected the net amount of $8.6 million as an asset as of December 31, 2020. State tax credits expire from 2021 to 2034.

Status of Internal Revenue Service (IRS) and State Examinations

The Company and its eligible subsidiaries file consolidated federal income tax returns. All tax years after 2016 are open for an IRS tax examination.

The Company also files state income tax returns in certain jurisdictions, including Idaho, Oregon, Montana and Alaska. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis.

The Idaho State Tax Commission is currently reviewing tax years 2014 through 2017. All tax years after 2016 are open for examination in Montana and Oregon, and all tax years after 2017 are open for examination in Idaho.

The Company believes that any open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.