Information about current and deferred income tax expense is as follows:


			FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2020		2019		2018
Current federal income tax (benefit) expense	$	(2,634)	$	1,600	$	15,304
Deferred federal income tax expense	21,865		37,963		5,863
Amortization of accumulated deferred investment tax credits	(159)		(191)		(236)
Total federal income tax expense	$	19,072	$	39,372	$	20,931
Current state income tax expense	2,636		1,675		7,771
Deferred state income tax expense	14,010		2,118		680
Total state income tax expense	$	16,646	$	3,793	$	8,451
Total federal and state income tax expense	$	35,718	$	43,165	$	29,382
Items charged or credited directly to member’s equity
Federal deferred	(2,202)		(5,130)		1,408
State deferred	(720)		(1,678)		460
Total tax expense (benefit) from items charged directly to member’s equity	$	(2,922)	$	(6,808)	$	1,868
Total federal and state income tax expense	$	32,796	$	36,357	$	31,250

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2020, and 2019 was comprised of the following:


	AT DEC. 31,
(THOUSANDS)	2020		2019
Depreciation and property basis differences	$	(865,807)	$	(862,263)
Net operating loss carryforward	109,819		120,955
NMTC	92,364		92,364
Fuel costs	(8,906)		(3,984)


Other comprehensive income	13,016		10,612
Regulated operations regulatory liability, net	47,060		34,836
Postretirement benefits	25,775		22,691
Merger fair value adjustments	(51,073)		(52,957)
Other	(23,624)		(19,312)
Accumulated deferred federal and state income taxes, net	$	(661,376)	$	(657,058)

Cleco Power

For the years ended December 31, 2020, 2019, and 2018, income tax expense was higher than the amount computed by applying the statutory rate. The differences are as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)	2020			2019			2018
Income before tax	$	123,454		$	193,714		$	218,181
Statutory rate	21.0		%	21.0		%	21.0		%
Tax expense at federal statutory rate	$	25,925		$	40,680		$	45,818
Increase (decrease)
Plant differences, including AFUDC flowthrough	5,100			(4,687)			(401)

State income taxes, net of federal benefit	6,303			11,683			11,080

Return to accrual adjustment	7,082			(2,008)			483

Amortization of excess ADIT	(16,667)			—			—
Other, net	(944)			(216)			(1,056)
Total taxes	$	26,799		$	45,452		$	55,924
Effective rate	21.7		%	23.5		%	25.6		%

Information about current and deferred income tax expense is as follows:


	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2020		2019		2018
Current federal income tax expense	$	15,724	$	14,781	$	44,411
Deferred federal income tax (benefit) expense	(5,033)		22,443		(9,033)
Amortization of accumulated deferred investment tax credits	(159)		(191)		(236)
Total federal income tax expense	$	10,532	$	37,033	$	35,142
Current state income tax expense	5,069		9,063		23,293
Deferred state income tax benefit	11,198		(644)		(2,511)
Total state income tax expense	$	16,267	$	8,419	$	20,782
Total federal and state income taxes	$	26,799	$	45,452	$	55,924
Items charged or credited directly to members’ equity
Federal deferred	(576)		(2,500)		797
State deferred	(189)		(818)		261
Total tax expense (benefit) from items charged directly to member’s equity	$	(765)	$	(3,318)	$	1,058
Total federal and state income tax expense	$	26,034	$	42,134	$	56,982

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2020, and 2019 was comprised of the following:


	AT DEC. 31,
(THOUSANDS)	2020		2019
Depreciation and property basis differences	$	(725,034)	$	(705,423)
Net operating loss carryforward	35,442		2,714
Fuel costs	(7,072)		(5,608)


Other comprehensive income	8,274		7,510
Regulated operations regulatory liability, net	47,060		34,836
Postretirement benefits	11,951		10,044
Other	(5,219)		(1,907)
Accumulated deferred federal and state income taxes, net	$	(634,598)	$	(657,834)

Valuation Allowance

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. At December 31, 2020, and 2019, Cleco had a deferred tax asset resulting from a NMTC carryforward of $92.4 million. If the NMTC carryforward is not utilized, it will begin to expire in 2030. Management considers it more likely than not that the deferred tax asset related to the NMTC carryforward will be realized; therefore, no valuation allowance has been recorded for Cleco and Cleco Power.

Net Operating Losses

For the 2019 tax year, Cleco created a federal net operating loss of approximately $433.2 million. For the 2020 tax year, Cleco expects to create an additional federal net operating loss of $65.0 million and a state net operating loss of $134.6 million.

For the 2020 tax year, Cleco Power expects to create a federal net operating loss of $136.3 million and a state operating loss of $134.6 million.

The federal net operating loss may be carried forward indefinitely, and state net operating loss carryforwards will begin to expire in 2040.

Cleco considers it more likely than not that these income tax losses will be utilized to reduce future income tax payments and utilize the entire net operating loss carryforward within the statutory deadlines.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At December 31, 2020, and 2019, Cleco and Cleco Power had no interest payable related to uncertain tax positions. For the years ended December 31, 2020, 2019, and 2018, Cleco and Cleco Power had no interest expense related to uncertain tax positions.

At December 31, 2020, and 2019, Cleco and Cleco Power had no liability for unrecognized tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31, 2020, 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 affect Cleco’s effective income tax rate.

Income Tax Audits

Cleco participates in the IRS’s Compliance Assurance Process in which financial results are examined and agreed upon prior to filing federal consolidated tax returns. While the statute of limitations remains open for tax years 2017, 2018, and 2019, management believes the likelihood of further examination by the IRS is remote.

The state income tax years 2017, 2018, and 2019 remain subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expenses. For the years ended December 31, 2020, 2019, and 2018, no penalties were recognized.

TCJA

On December 22, 2017, the TCJA was enacted into law. The TCJA includes significant changes to the IRC, as amended, including amendments which significantly change the taxation of business entities and includes specific provisions related to

rate regulated activities, including Cleco Power. The most significant change that impacts Cleco is the reduction of the corporate federal income tax rate from 35% to 21%.

At December 31, 2020, and 2019, Cleco and Cleco Power had $352.4 million and $375.0 million, accrued for the excess ADIT, respectively. For more information on the regulatory treatment of the TCJA regulatory liability, see Note 6 — “Regulatory Assets and Liabilities — Income Taxes” and Note 13 — “Regulation and Rates — TCJA.”

Additionally, as a result of the TCJA, effective for tax years beginning after December 31, 2017, corporations are no longer subject to the alternative minimum tax (AMT). For companies with unused AMT credits, the credits may be carried forward and used as refundable credits for tax years beginning after 2017, but before 2022. At December 31, 2019, Cleco had $1.4 million in non-current AMT credits recorded in Other deferred charges on Cleco’s Consolidated Balance Sheets. The CARES Act passed in 2020 allowed businesses to claim the refund in the current year. Cleco used the remaining unused AMT credits in 2020.

CARES Act

On March 27, 2020, the CARES Act was enacted and signed into law in response to the COVID-19 pandemic. Among other provisions, the CARES Act includes modifications on the limitations of business interest for the 2020 and 2019 tax years. The modifications increase the allowable business interest deduction from 30% to 50% of adjusted taxable income. Cleco did not have any disallowed interest for the 2019 tax year and does not anticipate having any disallowed interest for the 2020 tax year.