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Income Taxes (Tables)
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
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:

 

 

 

MGE Energy

 

 

MGE

 

(In thousands)

 

2021

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2019

 

Current payable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,589

)

 

$

4,179

 

 

$

8,017

 

 

$

(3,434

)

 

$

3,716

 

 

$

7,616

 

State

 

 

3,002

 

 

 

5,095

 

 

 

4,647

 

 

 

3,163

 

 

 

4,790

 

 

 

4,608

 

Net-deferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,473

)

 

 

6,181

 

 

 

3,510

 

 

 

(1,951

)

 

 

4,756

 

 

 

2,242

 

State

 

 

6,310

 

 

 

4,182

 

 

 

3,702

 

 

 

5,605

 

 

 

3,787

 

 

 

3,044

 

Amortized investment tax credits

 

 

(1,135

)

 

 

(214

)

 

 

(92

)

 

 

(1,135

)

 

 

(214

)

 

 

(92

)

Total income tax provision

 

$

4,115

 

 

$

19,423

 

 

$

19,784

 

 

$

2,248

 

 

$

16,835

 

 

$

17,418

 

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:

 

 

 

MGE Energy

 

MGE

 

 

2021

 

2020

 

2019

 

2021

 

2020

 

2019

Statutory federal income tax rate

 

 

21.0

 

%

 

 

21.0

 

%

 

 

21.0

 

%

 

 

21.0

 

%

 

 

21.0

 

%

 

 

21.0

 

%

State income taxes, net of federal benefit

 

 

6.2

 

 

 

 

6.3

 

 

 

 

6.2

 

 

 

 

6.2

 

 

 

 

6.3

 

 

 

 

6.1

 

 

Amortized investment tax credits

 

 

(1.5

)

 

 

 

(0.2

)

 

 

 

(0.1

)

 

 

 

(1.5

)

 

 

 

(0.2

)

 

 

 

(0.1

)

 

Credit for electricity from wind energy

 

 

(6.0

)

 

 

 

(6.2

)

 

 

 

(5.7

)

 

 

 

(6.4

)

 

 

 

(6.8

)

 

 

 

(6.2

)

 

AFUDC equity, net

 

 

(0.9

)

 

 

 

(1.2

)

 

 

 

(0.3

)

 

 

 

(1.0

)

 

 

 

(1.4

)

 

 

 

(0.3

)

 

Amortization of utility excess deferred tax(a)

 

 

(14.8

)

 

 

 

(2.0

)

 

 

 

(2.4

)

 

 

 

(15.8

)

 

 

 

(2.2

)

 

 

 

(2.7

)

 

Other, net, individually insignificant

 

 

(0.3

)

 

 

 

(0.3

)

 

 

 

(0.1

)

 

 

 

(0.3

)

 

 

 

(0.3

)

 

 

 

(0.1

)

 

Effective income tax rate

 

 

3.7

 

%

 

 

17.4

 

%

 

 

18.6

 

%

 

 

2.2

 

%

 

 

16.4

 

%

 

 

17.7

 

%

 

(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.
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:

 

 

 

MGE Energy

 

 

MGE

 

(In thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Deferred tax assets

 

 

 

 

 

 

 

 

 

 

 

 

Investment in ATC

 

$

20,868

 

 

$

21,688

 

 

$

 

 

$

 

Federal tax credits

 

 

39,161

 

 

 

19,199

 

 

 

39,161

 

 

 

20,080

 

Accrued expenses

 

 

11,053

 

 

 

11,115

 

 

 

11,047

 

 

 

11,105

 

Pension and other postretirement benefits

 

 

24,888

 

 

 

35,446

 

 

 

24,888

 

 

 

35,446

 

Deferred tax regulatory account

 

 

42,401

 

 

 

41,318

 

 

 

42,401

 

 

 

41,318

 

Derivatives

 

 

241

 

 

 

3,852

 

 

 

241

 

 

 

3,852

 

Leases

 

 

7,218

 

 

 

6,704

 

 

 

7,218

 

 

 

6,704

 

Other

 

 

17,390

 

 

 

14,073

 

 

 

17,442

 

 

 

14,125

 

Gross deferred income tax assets

 

 

163,220

 

 

 

153,395

 

 

 

142,398

 

 

 

132,630

 

Less valuation allowance

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Net deferred income tax assets

 

$

163,220

 

 

$

153,357

 

 

$

142,398

 

 

$

132,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Property-related

 

$

274,613

 

 

$

257,397

 

 

$

274,613

 

 

$

257,397

 

Investment in ATC

 

 

52,731

 

 

 

51,518

 

 

 

 

 

 

 

Bond transactions

 

 

534

 

 

 

595

 

 

 

534

 

 

 

595

 

Pension and other postretirement benefits

 

 

34,781

 

 

 

45,658

 

 

 

34,781

 

 

 

45,658

 

Derivatives

 

 

241

 

 

 

3,852

 

 

 

241

 

 

 

3,852

 

Tax deductible prepayments

 

 

10,222

 

 

 

9,059

 

 

 

10,210

 

 

 

9,059

 

Leases

 

 

7,218

 

 

 

6,704

 

 

 

7,218

 

 

 

6,704

 

Other

 

 

14,029

 

 

 

10,045

 

 

 

13,686

 

 

 

9,717

 

Gross deferred income tax liabilities

 

 

394,369

 

 

 

384,828

 

 

 

341,283

 

 

 

332,982

 

Deferred income taxes, net

 

$

231,149

 

 

$

231,471

 

 

$

198,885

 

 

$

200,390

 

Summary Of Tax Credit Carryforwards

The components of federal and state tax benefit carryovers as of December 31, are as follows:

 

 

 

MGE Energy

 

 

MGE

 

(In thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Federal tax credits

 

$

39,161

 

 

$

19,199

 

 

$

39,161

 

 

$

20,080

 

State net operating losses

 

 

3

 

 

 

621

 

 

 

3

 

 

 

621

 

Valuation allowances for state net operating losses

 

 

(3

)

 

 

(621

)

 

 

(3

)

 

 

(621

)

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and interest is as follows:

 

(In thousands)

 

 

 

 

 

 

 

 

 

Unrecognized Tax Benefits:

 

2021

 

 

2020

 

 

2019

 

Unrecognized tax benefits, January 1,

 

$

2,281

 

 

$

2,093

 

 

$

1,949

 

Additions based on tax positions related to the current year

 

 

714

 

 

 

796

 

 

 

741

 

Additions based on tax positions related to the prior years

 

 

-

 

 

 

-

 

 

 

84

 

Reductions based on tax positions related to the prior years

 

 

(642

)

 

 

(608

)

 

 

(681

)

Unrecognized tax benefits, December 31,

 

$

2,353

 

 

$

2,281

 

 

$

2,093

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Interest on Unrecognized Tax Benefits:

 

2021

 

 

2020

 

 

2019

 

Accrued interest on unrecognized tax benefits, January 1,

 

$

154

 

 

$

176

 

 

$

191

 

Reduction in interest expense on uncertain tax positions

 

 

(98

)

 

 

(124

)

 

 

(137

)

Interest expense on uncertain tax positions

 

 

94

 

 

 

102

 

 

 

122

 

Accrued interest on unrecognized tax benefits, December 31,

 

$

150

 

 

$

154

 

 

$

176

 

Tax Years that Remain Subject to Examination The following table shows tax years that remain subject to examination by major jurisdiction:

 

 

Taxpayer

Open Years

 

 

MGE Energy and consolidated subsidiaries in federal return

2018 through 2021

 

 

MGE Energy Wisconsin combined reporting corporation return

2017 through 2021