Income Taxes (Tables)
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12 Months Ended |
Dec. 31, 2021 |
Income Tax Disclosure [Abstract] |
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Income Tax Provision |
On a consolidated and separate company basis, the income tax provision consists of the following provision (benefit) components for the years ended December 31:
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MGE Energy |
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MGE |
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(In thousands) |
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2021 |
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2020 |
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2019 |
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2021 |
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2020 |
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2019 |
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Current payable: |
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Federal |
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$ |
(2,589 |
) |
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$ |
4,179 |
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$ |
8,017 |
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$ |
(3,434 |
) |
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$ |
3,716 |
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$ |
7,616 |
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State |
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3,002 |
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5,095 |
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4,647 |
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3,163 |
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4,790 |
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4,608 |
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Net-deferred: |
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Federal |
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(1,473 |
) |
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6,181 |
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3,510 |
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(1,951 |
) |
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4,756 |
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2,242 |
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State |
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6,310 |
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4,182 |
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3,702 |
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5,605 |
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3,787 |
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3,044 |
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Amortized investment tax credits |
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(1,135 |
) |
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(214 |
) |
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(92 |
) |
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(1,135 |
) |
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(214 |
) |
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(92 |
) |
Total income tax provision |
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$ |
4,115 |
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$ |
19,423 |
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$ |
19,784 |
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$ |
2,248 |
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$ |
16,835 |
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$ |
17,418 |
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Effective Tax Rate Reconciliation |
The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:
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MGE Energy |
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MGE |
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2021 |
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2020 |
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2019 |
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2021 |
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2020 |
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2019 |
Statutory federal income tax rate |
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21.0 |
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% |
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21.0 |
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% |
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21.0 |
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% |
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21.0 |
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% |
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21.0 |
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% |
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21.0 |
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% |
State income taxes, net of federal benefit |
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6.2 |
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6.3 |
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6.2 |
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6.2 |
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6.3 |
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6.1 |
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Amortized investment tax credits |
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(1.5 |
) |
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(0.2 |
) |
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(0.1 |
) |
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(1.5 |
) |
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(0.2 |
) |
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(0.1 |
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Credit for electricity from wind energy |
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(6.0 |
) |
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(6.2 |
) |
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(5.7 |
) |
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(6.4 |
) |
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(6.8 |
) |
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(6.2 |
) |
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AFUDC equity, net |
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(0.9 |
) |
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(1.2 |
) |
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(0.3 |
) |
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(1.0 |
) |
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(1.4 |
) |
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(0.3 |
) |
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Amortization of utility excess deferred tax(a) |
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(14.8 |
) |
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(2.0 |
) |
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(2.4 |
) |
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(15.8 |
) |
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(2.2 |
) |
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(2.7 |
) |
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Other, net, individually insignificant |
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(0.3 |
) |
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(0.3 |
) |
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(0.1 |
) |
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(0.3 |
) |
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(0.3 |
) |
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(0.1 |
) |
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Effective income tax rate |
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3.7 |
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% |
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17.4 |
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% |
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18.6 |
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% |
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2.2 |
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% |
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16.4 |
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% |
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17.7 |
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% |
(a)Included are impacts of the 2017 Tax Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting in recognition of IRS rules that restrict the rate at which excess deferred taxes may be returned to utility customers. For the years ended December 31, 2021, 2020 and 2019, MGE recognized $2.6 million, $2.2 million, and $2.6 million, respectively. Included in the 2021 rate settlement was a one-time return to customers of the electric portion of excess deferred taxes related to the 2017 Tax Act not restricted by IRS normalization rules. For the year ended December 31, 2021, MGE recognized $13.2 million.
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Deferred Tax Liabilities (Assets) |
The significant components of deferred tax assets and liabilities that appear on the consolidated balance sheets as of December 31 are as follows:
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MGE Energy |
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MGE |
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(In thousands) |
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2021 |
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2020 |
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2021 |
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2020 |
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Deferred tax assets |
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Investment in ATC |
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$ |
20,868 |
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$ |
21,688 |
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$ |
— |
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$ |
— |
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Federal tax credits |
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39,161 |
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19,199 |
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39,161 |
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20,080 |
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Accrued expenses |
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11,053 |
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11,115 |
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11,047 |
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11,105 |
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Pension and other postretirement benefits |
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24,888 |
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35,446 |
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24,888 |
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35,446 |
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Deferred tax regulatory account |
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42,401 |
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41,318 |
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42,401 |
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41,318 |
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Derivatives |
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241 |
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3,852 |
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241 |
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3,852 |
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Leases |
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7,218 |
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6,704 |
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7,218 |
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6,704 |
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Other |
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17,390 |
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14,073 |
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17,442 |
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14,125 |
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Gross deferred income tax assets |
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163,220 |
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153,395 |
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142,398 |
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132,630 |
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Less valuation allowance |
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— |
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(38 |
) |
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— |
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(38 |
) |
Net deferred income tax assets |
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$ |
163,220 |
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$ |
153,357 |
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$ |
142,398 |
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$ |
132,592 |
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Deferred tax liabilities |
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Property-related |
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$ |
274,613 |
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$ |
257,397 |
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$ |
274,613 |
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$ |
257,397 |
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Investment in ATC |
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52,731 |
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51,518 |
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— |
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— |
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Bond transactions |
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534 |
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595 |
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534 |
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595 |
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Pension and other postretirement benefits |
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34,781 |
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45,658 |
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34,781 |
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45,658 |
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Derivatives |
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241 |
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3,852 |
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241 |
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3,852 |
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Tax deductible prepayments |
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10,222 |
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9,059 |
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10,210 |
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9,059 |
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Leases |
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7,218 |
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6,704 |
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7,218 |
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6,704 |
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Other |
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14,029 |
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10,045 |
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13,686 |
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9,717 |
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Gross deferred income tax liabilities |
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394,369 |
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384,828 |
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341,283 |
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332,982 |
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Deferred income taxes, net |
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$ |
231,149 |
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$ |
231,471 |
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$ |
198,885 |
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$ |
200,390 |
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Summary Of Tax Credit Carryforwards |
The components of federal and state tax benefit carryovers as of December 31, are as follows:
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MGE Energy |
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MGE |
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(In thousands) |
|
2021 |
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2020 |
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2021 |
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2020 |
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Federal tax credits |
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$ |
39,161 |
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$ |
19,199 |
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$ |
39,161 |
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$ |
20,080 |
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State net operating losses |
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3 |
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621 |
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3 |
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621 |
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Valuation allowances for state net operating losses |
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(3 |
) |
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(621 |
) |
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(3 |
) |
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(621 |
) |
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Unrecognized Tax Benefits and Interest |
A tabular reconciliation of unrecognized tax benefits and interest is as follows:
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(In thousands) |
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Unrecognized Tax Benefits: |
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2021 |
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2020 |
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2019 |
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Unrecognized tax benefits, January 1, |
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$ |
2,281 |
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$ |
2,093 |
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$ |
1,949 |
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Additions based on tax positions related to the current year |
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714 |
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796 |
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741 |
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Additions based on tax positions related to the prior years |
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- |
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- |
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|
84 |
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Reductions based on tax positions related to the prior years |
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(642 |
) |
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(608 |
) |
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(681 |
) |
Unrecognized tax benefits, December 31, |
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$ |
2,353 |
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$ |
2,281 |
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$ |
2,093 |
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(In thousands) |
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Interest on Unrecognized Tax Benefits: |
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2021 |
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2020 |
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2019 |
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Accrued interest on unrecognized tax benefits, January 1, |
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$ |
154 |
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$ |
176 |
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$ |
191 |
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Reduction in interest expense on uncertain tax positions |
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(98 |
) |
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(124 |
) |
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(137 |
) |
Interest expense on uncertain tax positions |
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94 |
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102 |
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122 |
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Accrued interest on unrecognized tax benefits, December 31, |
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$ |
150 |
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$ |
154 |
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$ |
176 |
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Tax Years that Remain Subject to Examination |
The following table shows tax years that remain subject to examination by major jurisdiction:
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Taxpayer |
Open Years |
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MGE Energy and consolidated subsidiaries in federal return |
2018 through 2021 |
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MGE Energy Wisconsin combined reporting corporation return |
2017 through 2021 |
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