INCOME TAXES

A reconciliation between the statutory federal income tax rate and the effective tax rate is as follows:



	IDACORP									Idaho Power
	2015			2014			2013			2015			2014			2013
	(thousands of dollars)
Federal income tax expense at 35% statutory rate	$	84,154		$	73,588		$	89,125		$	83,724		$	73,116		$	88,550
Change in taxes resulting from:
AFUDC	(11,140		)	(9,238		)	(7,882		)	(11,140		)	(9,238		)	(7,882		)
Capitalized interest	2,693			2,278			1,832			2,693			2,278			1,832
Investment tax credits	(2,963		)	(3,002		)	(3,119		)	(2,963		)	(3,002		)	(3,119		)
Removal costs	(4,807		)	(3,656		)	(3,527		)	(4,807		)	(3,656		)	(3,527		)
Capitalized overhead costs	(8,750		)	(8,750		)	(8,750		)	(8,750		)	(8,750		)	(8,750		)
Capitalized repair costs	(28,700		)	(26,250		)	(19,250		)	(28,700		)	(26,250		)	(19,250		)
Bond redemption costs	(6,459		)	—			—			(6,459		)	—			—
Tax method change – capitalized repairs	—			(24,516		)	4,583			—			(24,516		)	4,583
State income taxes, net of federal benefit	7,343			4,680			6,730			7,503			5,334			6,970
Depreciation	17,149			16,040			14,820			17,149			16,040			14,820
Affordable housing tax credits	(3,258		)	(5,189		)	(5,503		)	—			—			—
Affordable housing investment amortization	1,519			2,757			1,684			—			—			—
Other, net	(1,021		)	(1,970		)	1,483			(22		)	(1,840		)	2,033
Total income tax expense	$	45,760		$	16,772		$	72,226		$	48,228		$	19,516		$	76,260
Effective tax rate	19.0%			8.0%			28.4%			20.2%			9.3%			30.1%

The items comprising income tax expense are as follows:



	IDACORP									Idaho Power
	2015			2014			2013			2015			2014			2013
	(thousands of dollars)
Income taxes current:
Federal	$	4,831		$	(4,926	)	$	3,416		$	16,470		$	(2,805	)	$	10,988
State	2,704			3,516			3,241			6,056			6,867			5,917
Total	7,535			(1,410		)	6,657			22,526			4,062			16,905
Income taxes deferred:
Federal	34,770			17,159			61,947			27,696			21,833			60,934
State	626			(3,260		)	1,806			(2,486		)	(6,421		)	(804		)
Total	35,396			13,899			63,753			25,210			15,412			60,130
Investment tax credits:
Deferred	3,455			3,044			2,344			3,455			3,044			2,344
Restored	(2,963		)	(3,002		)	(3,119		)	(2,963		)	(3,002		)	(3,119		)
Total	492			42			(775		)	492			42			(775		)
Affordable housing investment amortization	2,337			4,241			2,591			—			—			—
Total income tax expense	$	45,760		$	16,772		$	72,226		$	48,228		$	19,516		$	76,260

The components of the net deferred tax liability are as follows:



	IDACORP				Idaho Power
	2015		2014		2015		2014
	(thousands of dollars)
Deferred tax assets:
Regulatory liabilities	$	51,131	$	55,490	$	51,131	$	55,490
Deferred compensation	27,573		25,355		27,489		25,240
Deferred revenue	34,282		28,529		34,282		28,529
Tax credits	147,299		154,044		30,307		26,843
Partnership investments	7,220		8,190		—		—
Retirement benefits	126,885		132,571		126,885		132,571
Other	11,245		15,222		10,745		14,553
Total	405,635		419,401		280,839		283,226
Deferred tax liabilities:
Property, plant and equipment	474,879		451,118		474,879		451,118
Regulatory assets	875,028		802,188		875,028		802,188
Power cost adjustments	18,489		23,192		18,489		23,192
Partnership investments	16,925		17,492		9,829		10,227
Retirement benefits	126,090		122,360		126,090		122,360
Other	31,600		25,982		28,895		22,252
Total	1,543,011		1,442,332		1,533,210		1,431,337
Net deferred tax liabilities	$	1,137,376	$	1,022,931	$	1,252,371	$	1,148,111

IDACORP's tax allocation agreement provides that each member of its consolidated group compute its income taxes on a separate company basis. Amounts payable or refundable are settled through IDACORP. See Note 1 for further discussion of accounting policies related to income taxes.

Tax Credit Carryforwards

As of December 31, 2015, IDACORP had $108.7 million of general business credit and $0.7 million of alternative minimum tax credit carryforwards for federal income tax purposes and $37.9 million of Idaho investment tax credit carryforward. The general business credit carryforward period expires from 2024 to 2035, and the Idaho investment tax credit expires from 2021 to 2029.

Uncertain Tax Positions

IDACORP and Idaho Power believe that they have no material income tax uncertainties for 2015 and prior tax years. Both companies recognize interest accrued related to unrecognized tax benefits as interest expense and penalties as other expense.

IDACORP and Idaho Power are subject to examination by their major tax jurisdictions - U.S. federal and the State of Idaho. The open tax years for examination are 2015 for federal and 2012-2015 for Idaho. In May 2009, IDACORP formally entered the U.S. Internal Revenue Service (IRS) Compliance Assurance Process (CAP) program for its 2009 tax year and has remained in the CAP program for all subsequent years. The CAP program provides for IRS examination and issue resolution throughout the current year with the objective of return filings containing no contested items. In 2015, the IRS completed its examination of IDACORP's 2014 tax year with no unresolved income tax issues.

Tax Accounting Method Changes for Repair-Related Expenditures

In the fourth quarter of 2014, Idaho Power finalized an income tax accounting method change for its 2014 tax year associated with the electric generation property portion of its capitalized repairs tax method it adopted in fiscal year 2010. As a result of the change, Idaho Power recorded an $8.8 million tax benefit related to the cumulative method change adjustment for years prior to 2014 and reversed a related $4.6 million tax expense estimate it had recorded in 2013 (discussed below).

The method change was pursuant to Revenue Procedure 2013-24 and brought Idaho Power's existing method into alignment with the Revenue Procedure's safe harbor unit-of-property definitions for electric generation property. The change also incorporated provisions of the final tangible property regulations issued by the U.S. Treasury Department and IRS in 2013 that addressed the deduction or capitalization of expenditures related to tangible property. Following the automatic consent procedures provided for in the Revenue Procedure, Idaho Power adopted this method with the filing of IDACORP’s 2014 consolidated federal income tax return in September 2015. The IRS approved the method change prior to the filing of the return as part of IDACORP’s 2014 CAP examination.

In the third quarter of 2014 Idaho Power, in coordination with the IRS through IDACORP’s CAP examination process, implemented aspects of the final tangible property regulations and other technical interpretations of these rules into its existing capitalized repairs tax accounting method for generation, transmission and distribution assets. These technical interpretations were received from the IRS in 2014. An $11.1 million tax benefit related to the portion of the 2013 capitalized repairs deduction based on these modifications was recorded in the third quarter of 2014. Idaho Power finalized these changes with the filing of IDACORP’s 2013 consolidated federal income tax return in September 2014. The IRS approved the repairs method modifications prior to the filing of the return as part of IDACORP’s 2013 CAP examination.

In connection with the issuance of the tangible property regulations and following the provisions of Revenue Procedure 2013-24 (discussed above), in 2013 Idaho Power assessed and estimated the impact of a method change associated with the electric generation property portion of its capitalized repairs method. Based upon this assessment, in 2013 Idaho Power recorded $4.6 million of income tax expense related to the estimated cumulative method change adjustment for years prior to 2013.