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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

The adjustments to deferred income taxes recorded as increases in regulatory liabilities and income tax expense as a result of the enactment of the Tax Act at December 31, 2017 are presented below:



	PNM		TNMP		Corporate and Other			Consolidated
	(In thousands)
Net increase in regulatory liabilities	$	402,501	$	146,451	$	—		$	548,952
Net decrease in deferred income tax liabilities (deferred income tax assets)	372,895		138,586		(19,990		)	491,491
Net deferred income tax expense	$	29,606	$	7,865	$	19,990		$	57,461

The adjustments to deferred income taxes resulting from completion of the Company’s analysis, which resulted primarily from differences between the estimated amounts recorded as of December 31, 2017 and the actual amounts reflected in the Company’s 2017 tax return filing, including adjustments resulting from additional guidance and interpretations to the Tax Act issued in 2018 related to bonus depreciation, certain incentive compensation, and other items are presented below:



	PNM			TNMP			Corporate and Other			Consolidated
	(In thousands)
Net increase (decrease) in regulatory liabilities	$	11,244		$	(4,069	)	$	—		$	7,175
Net decrease in deferred income tax liabilities (deferred income tax assets)	(2,175		)	(9,784		)	13,869			1,910
Net increase in affiliate receivables (affiliate payables)	12,300			4,042			(16,342		)	—
Net deferred income tax expense	$	1,119		$	1,673		$	2,473		$	5,265

Schedule of Components of Income Tax Expense (Benefit)

PNM’s income taxes (benefit) consist of the following components:



	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Current federal income tax	$	(6,266	)	$	(6,644	)	$	118
Current state income tax	449			(2,661		)	(1,112		)
Deferred federal income tax	(12,308		)	5,661			73,308
Deferred state income tax	(7,590		)	(2,080		)	9,527
Amortization of accumulated investment tax credits	(247		)	(247		)	(286		)
Total income taxes (benefit)	$	(25,962	)	$	(5,971	)	$	81,555

PNMR’s income taxes (benefits) consist of the following components:



	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Current federal income tax	$	60		$	—		$	—
Current state income tax	43			(244		)	(188		)
Deferred federal income tax	(20,372		)	7,716			119,182
Deferred state income tax	(4,491		)	648			11,632
Amortization of accumulated investment tax credits	(522		)	(345		)	(286		)
Total income taxes (benefits)	$	(25,282	)	$	7,775		$	130,340

TNMP’s income taxes consist of the following components:



	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Current federal income tax	$	10,792		$	13,347		$	2,472
Current state income tax	1,904			1,753			1,765
Deferred federal income tax	(7,621		)	(540		)	27,304
Deferred state income tax	(29		)	2,320			(29		)
Total income taxes	$	5,046		$	16,880		$	31,512

Schedule of Effective Income Tax Rate Reconciliation

The differences are attributable to the following factors:



	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Federal income tax at statutory rates	$	6,187		$	13,514		$	59,139
Amortization of accumulated investment tax credits	(247		)	(247		)	(286		)
Amortization of excess deferred income tax (Note 17)	(28,923		)	(19,779		)	—
Flow-through of depreciation items	1,077			674			1,103
Earnings attributable to non-controlling interest in Valencia	(2,991		)	(3,173		)	(5,256		)
State income tax, net of federal benefit	92			1,323			4,926
Impairment of state net operating loss carryforwards	—			—			627
Allowance for equity funds used during construction	(1,398		)	(1,716		)	(3,032		)
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization	1,367			1,367			(2,225		)
Federal income tax rate change	—			(683		)	29,606
Allocation of tax expense (benefit) related to stock compensation awards	(559		)	3,967			(1,708		)
Other	(567		)	(1,218		)	(1,339		)
Total income taxes (benefit)	$	(25,962	)	$	(5,971	)	$	81,555

The differences are attributable to the following factors:



	Year Ended December 31,
	2019			2018		2017
	(In thousands)
Federal income tax at statutory rates	$	12,778		$	14,379	$	23,475
Amortization of excess deferred income tax	(8,876		)	—		—
State income tax, net of federal benefit	1,532			1,454		1,198
Federal income tax rate change	—			—		7,865
Allocation of tax expense (benefit) related to stock compensation awards	(236		)	735		(616		)
Other	(152		)	312		(410		)
Total income taxes	$	5,046		$	16,880	$	31,512

PNMR’s provision for income taxes (benefits) differed from the federal income tax computed at the statutory rate for each of the years shown. The differences are attributable to the following factors:



	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Federal income tax at statutory rates	$	14,038		$	22,902		$	79,016
Amortization of accumulated investment tax credits	(522		)	(345		)	(286		)
Amortization of excess deferred income tax (Note 17)	(37,799		)	(19,779		)	—
Flow-through of depreciation items	1,136			712			1,147
Earnings attributable to non-controlling interest in Valencia	(2,991		)	(3,173		)	(5,256		)
State income tax, net of federal benefit	298			1,358			5,398
Impairment of state net operating loss carryforwards	—			—			819
Allowance for equity funds used during construction	(1,990		)	(2,185		)	(3,331		)
Impairment of charitable contribution carryforward	—			—			909
Regulatory recovery of prior year impairments of state net operating loss carryforward, including amortization	1,367			1,367			(2,225		)
Federal income tax rate change	—			2,914			57,461
Tax expense (benefit) related to stock compensation awards	(795		)	4,647			(2,324		)
Other	1,976			(643		)	(988		)
Total income taxes (benefits)	$	(25,282	)	$	7,775		$	130,340

Components of Deferred Tax Assets and Liabilities

The components of PNMR’s net accumulated deferred income tax liability were:



	December 31,
	2019			2018
	(In thousands)
Deferred tax assets:
Net operating loss	$	59,488		$	82,386
Regulatory liabilities related to income taxes	145,087			158,416
Federal tax credit carryforwards	101,231			76,481
Shutdown of SJGS Units 2 and 3	—			1,638
Regulatory disallowance related to NM 2015 Rate Case (Note 17)	34,639			—
Other	54,199			97,515
Total deferred tax assets	394,644			416,436
Deferred tax liabilities:
Depreciation and plant related	(787,928		)	(767,482		)
Investment tax credit	(81,186		)	(57,853		)
Regulatory assets related to income taxes	(58,495		)	(62,889		)
CTC	(1,466		)	(3,613		)
Pension	(35,029		)	(35,407		)
Regulatory asset for shutdown of SJGS Units 2 and 3	(28,831		)	(30,425		)
Other	(27,767		)	(59,486		)
Total deferred tax liabilities	(1,020,702		)	(1,017,155		)
Net accumulated deferred income tax liabilities	$	(626,058	)	$	(600,719	)

The components of TNMP’s net accumulated deferred income tax liability at December 31, were:



	December 31,
	2019			2018
	(In thousands)
Deferred tax assets:
Regulatory liabilities related to income taxes	$	30,238		$	33,021
Other	3,788			4,517
Total deferred tax assets	34,026			37,538
Deferred tax liabilities:
Depreciation and plant related	(142,791		)	(136,117		)
CTC	(1,466		)	(3,613		)
Regulatory assets related to income taxes	(9,016		)	(9,328		)
Loss on reacquired debt	(6,345		)	(6,617		)
Pension	(4,420		)	(4,361		)
AMS	(8,473		)	(10,030		)
Other	(1,666		)	(3,710		)
Total deferred tax liabilities	(174,177		)	(173,776		)
Net accumulated deferred income tax liabilities	$	(140,151	)	$	(136,238	)

The components of PNM’s net accumulated deferred income tax liability were:



	December 31,
	2019			2018
	(In thousands)
Deferred tax assets:
Net operating loss	$	25,889		$	50,762
Regulatory liabilities related to income taxes	114,849			125,395
Federal tax credit carryforwards	82,983			62,230
Shutdown of SJGS Units 2 and 3	—			1,638
Regulatory disallowance	34,639			—
Other	38,735			36,916
Total deferred tax assets	297,095			276,941
Deferred tax liabilities:
Depreciation and plant related	(630,293		)	(606,673		)
Investment tax credit	(74,667		)	(55,484		)
Regulatory assets related to income taxes	(49,479		)	(53,561		)
Pension	(30,609		)	(31,046		)
Regulatory asset for shutdown of SJGS Units 2 and 3	(28,831		)	(30,425		)
Other	(5,206		)	(2,519		)
Total deferred tax liabilities	(819,085		)	(779,708		)
Net accumulated deferred income tax liabilities	$	(521,990	)	$	(502,767	)

Reconciliation of Accumulated Deferred Income Tax Liability to Deferred Income Tax Benefit

The following table reconciles the change in PNM’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:



	Year Ended
	December 31, 2019
	(In thousands)
Net change in deferred income tax liability per above table	$	19,223
Change in tax effects of income tax related regulatory assets and liabilities	(7,861		)
Amortization of excess deferred income tax	(28,923		)
Tax effect of mark-to-market adjustments	(2,962		)
Tax effect of excess pension liability	(908		)
Adjustment for uncertain income tax positions	488
Reclassification of unrecognized tax benefits	(488		)
Amortization of state net operating loss recovered in prior years	1,367
Other	(81		)
Deferred income taxes (benefits)	$	(20,145	)

The following table reconciles the change in TNMP’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:



	Year Ended
	December 31, 2019
	(In thousands)
Net change in deferred income tax liability per above table	$	3,913
Change in tax effects of income tax related regulatory assets and liabilities	(2,471		)
Amortization of excess deferred income tax	(8,876		)
Other	(216		)
Deferred income taxes (benefits)	$	(7,650	)

The following table reconciles the change in PNMR’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:



	Year Ended
	December 31, 2019
	(In thousands)
Net change in deferred income tax liability per above table	$	25,339
Change in tax effects of income tax related regulatory assets and liabilities	(10,332		)
Amortization of excess deferred income tax	(37,799		)
Tax effect of mark-to-market adjustments	(2,261		)
Tax effect of excess pension liability	(908		)
Adjustment for uncertain income tax positions	499
Reclassification of unrecognized tax benefits	(499		)
Amortization of state net operating loss recovered in prior years	1,367
Refundable alternative minimum tax credit carryforward reclassified to receivable	(576		)
Other	(215		)
Deferred income taxes (benefits)	$	(25,385	)

Reconciliation of Unrecognized Tax Benefits (Expenses)

A reconciliation of unrecognized tax benefits is as follows:



	PNMR		PNM		TNMP
	(In thousands)
Balance at December 31, 2016	$	6,752	$	3,949	$	—
Additions based on tax positions related to 2017	262		262		—
Additions (reductions) for tax positions of prior years	2,415		2,352		63
Settlement payments	—		—		—
Balance at December 31, 2017	9,429		6,563		63
Additions based on tax positions related to 2018	543		543		—
Additions (reductions) for tax positions of prior years	222		182		40
Settlement payments	—		—		—
Balance at December 31, 2018	10,194		7,288		103
Additions based on tax positions related to 2019	329		329		—
Additions (reductions) for tax positions of prior years	170		159		11
Settlement payments	—		—		—
Balance at December 31, 2019	$	10,693	$	7,776	$	114

Deferred Income Taxes, Increase (Decrease) In Regulatory Liability and Income Tax Expense

Adjustments to deferred income taxes recorded as increases (decreases) in the regulatory liability and income tax expense were as follows:



	PNMR			PNM			TNMP
	(In thousands)
December 31, 2017:
Regulatory liability	$	(10,109	)	$	(10,109	)	$	—
Income tax expense	$	(1,259	)	$	(1,179	)	$	—

Tax Carryforward, Impairments, net of Federal Tax Benefit

The impairments after reflecting the expiration of carryforwards under applicable tax laws, net of federal tax benefit, for 2017 through 2019 are as follows:



	PNMR			PNM			TNMP
	(In thousands)
December 31, 2019:
State tax credit carryforwards	$	425		$	—		$	—
State net operating loss carryforwards	$	—		$	—		$	—
Charitable contribution carryforwards	$	—		$	—		$	—
Compensation expense	$	(99	)	$	(100	)	$	2
December 31, 2018:
State tax credit carryforwards	$	—		$	—		$	—
State net operating loss carryforwards	$	—		$	—		$	—
Charitable contribution carryforwards	$	—		$	—		$	—
Compensation expense	$	410		$	298		$	111
December 31, 2017:
State tax credit carryforwards	$	—		$	—		$	—
State net operating loss carryforwards	$	819		$	627		$	—
Charitable contribution carryforwards	$	909		$	—		$	—

Summary of Tax Credit Carryforwards

The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2019 and 2018 are as follows:



	PNMR		PNM		TNMP
	(In thousands)
December 31, 2019:
State tax credit carryforwards	$	425	$	—	$	—
State net operating loss carryforwards	$	—	$	—	$	—
Charitable contribution carryforwards	$	—	$	—	$	—
Compensation expense	$	311	$	198	$	113
December 31, 2018:
State tax credit carryforwards	$	—	$	—	$	—
State net operating loss carryforwards	$	—	$	—	$	—
Charitable contribution carryforwards	$	—	$	—	$	—
Compensation expense	$	410	$	298	$	111