Note 8 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three and nine months ended September 30, 2017, and 2016:



Cleco
					SUCCESSOR				PREDECESSOR
	FOR THE THREE MONTHS ENDED SEPT. 30, 2017		FOR THE THREE MONTHS ENDED SEPT. 30, 2016		FOR THE NINE MONTHS ENDED SEPT. 30, 2017		APR. 13, 2016 - SEPT. 30, 2016		JAN. 1, 2016 - APR. 12, 2016
Effective tax rate	33.7	%	37.4	%	35.5	%	40.3	%	(704.9	)%



Cleco Power
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
	2017		2016		2017		2016
Effective tax rate	35.4	%	35.9	%	36.8	%	19.5	%

For the successor periods, the effective income tax rates for Cleco were different than the federal statutory rate primarily due to permanent tax differences, the flowthrough of state tax benefits, including AFUDC equity, benefits delivered from Cleco’s investment in the NMTC Fund, and state tax expense.

For the predecessor period, the effective income tax rates for Cleco were different than the federal statutory rate primarily due to a significant portion of the merger costs not being deductible, the flowthrough of state tax benefits, including AFUDC equity, benefits delivered from Cleco’s investment in the NMTC Fund, and state tax expense.

For the three and nine months ended September 30, 2017, and 2016, the effective income tax rate for Cleco Power was different than the federal statutory rate primarily due to the flowthrough of state tax benefits, including AFUDC equity, and state tax expense.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At September 30, 2017, and December 31, 2016, Cleco and Cleco Power had no interest payable related to uncertain tax positions. For the nine months ended September 30, 2017, and 2016, Cleco and Cleco Power had no interest expense related to uncertain tax positions.

At September 30, 2017, Cleco had no liability for uncertain tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of September 30, 2017, for Cleco and Cleco Power would be unchanged in the next 12 months. The settlement of open tax years could involve the payment of additional taxes, and/or the recognition of tax benefits, which may have an effect on Cleco’s effective tax rate.

The federal income tax years that remain subject to examination by the IRS are 2013, 2014, 2015, and 2016.

Beginning with the 2013 tax year, Cleco entered into the IRS’s Compliance Assurance Process which allows taxpayers to work collaboratively with an IRS team to identify and resolve potential tax issues before the federal tax return is filed each year. Cleco must apply for admission to the program each year. Cleco has been approved for the Compliance Assurance Process through the 2017 tax year.

The state income tax years that remain subject to examination by the Louisiana Department of Revenue are 2014 and 2015.

Cleco classifies income tax penalties as a component of other expense. For the nine months ended September 30, 2017, and 2016, no penalties were recognized.