The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three months ended March 31, 2021, and 2020:

For the three months ended March 31, 2021, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the amortization of excess ADIT.

For the three months ended March 31, 2020, the effective income tax rates for both Cleco and Cleco Power were different than the federal statutory rate primarily due to the adjustment to record tax expense at the projected annual effective tax rate; an adjustment for increased allowable interest expense deduction as a result of the CARES Act; permanent tax differences; the flowthrough of tax benefits, including AFUDC equity; and state tax expense.

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At March 31, 2021, and December 31, 2020, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions. Cleco estimates that it is reasonably possible that the balance of unrecognized tax benefits as of March 31, 2021, 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.

Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal consolidated tax return. While the statute of limitations remains open for tax years 2017, 2018, and 2019, the IRS has completed its review of the year 2017 through 2019, and these tax returns were filed consistent with the IRS’s review. The IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for 2020. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances.

Cleco classifies income tax penalties as a component of other expense. For the three months ended March 31, 2021, and 2020, no penalties were recognized.

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions such as an alternative minimum tax credit refund, a five-year net operating loss carryback from years 2018 through 2020, and deferred payments of employer payroll taxes.

Cleco deferred $6.0 million in employer payroll tax payments for the period March 27, 2020, through December 31, 2020. Cleco will pay $3.0 million of the obligation by December 31, 2021, and the remaining $3.0 million by December 31, 2022.

Cleco Power deferred $3.6 million in employer payroll tax payments for the period March 27, 2020 through December 31, 2020. Cleco Power will pay $1.8 million of the obligation by December 31, 2021, and the remaining $1.8 million by December 31, 2022.

The CARES Act also 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 does not anticipate having any disallowed interest for the 2020 tax year.

In December 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. The CAA includes COVID-19 tax relief and tax extender provisions including extensions of time to begin construction on and placed in-service assets generating production tax credits and income tax credits, 100% deductibility of business meals in 2021 and 2022, and an extension of the work opportunity tax credit. The income tax credit percentage has been increased for projects starting construction through 2023 and placed in service by the end of

On March 31, 2021, the President announced the American Jobs Act. This proposal includes a number of incentives to encourage construction of certain transmission and energy storage property. The proposed act also proposes to raise the federal statutory corporate income tax rate from 21% to 28% and to introduce a minimum tax based on book income. Currently, management is unable to predict the impact of the proposed act on the Registrants.