Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes [Line Items]

Income Taxes

Income Taxes

Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations:

Six Months Ended June 30	2019		2018
CMS Energy, including Consumers
U.S. federal income tax rate	21.0	%	21.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	5.4		5.6
TCJA excess deferred taxes1	(3.5	)	(3.4	)
Production tax credits	(2.5	)	(1.7	)
Accelerated flow-through of regulatory tax benefits2	(1.5	)	(5.0	)
Research and development tax credits, net3	(0.2	)	(2.2	)
Other, net	(0.6	)	0.3
Effective tax rate	18.1	%	14.6	%
Consumers
U.S. federal income tax rate	21.0	%	21.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	5.7		5.8
TCJA excess deferred taxes1	(3.2	)	(3.2	)
Accelerated flow-through of regulatory tax benefits2	(1.8	)	(4.7	)
Production tax credits	(1.3	)	(1.5	)
Research and development tax credits, net3	(0.2	)	(2.1	)
Other, net	(0.4	)	—
Effective tax rate	19.8	%	15.3	%

¹  In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a $1.8 billion regulatory liability. This regulatory liability relates to the excess deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the Internal Revenue Code. The normalization provisions require that the excess deferred taxes be refunded to customers over the remaining average service life of the associated assets. In January 2018, Consumers began to reduce this regulatory liability by crediting income tax expense. Consumers has fully reserved for the eventual refund of these excess deferred taxes that it has credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue, and will continue to do so until these benefits are passed on to customers in accordance with an MPSC order, expected to be issued in 2019. At June 30, 2019, this reserve for refund of these excess deferred taxes totaled $53 million.

²  In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow‑through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014, with the electric portion ending in 2018. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $7 million for the six months ended June 30, 2019 and by $22 million for the six months ended June 30, 2018.

³ 

In March 2018, Consumers finalized a study of research and development tax credits for the tax years 2012 through 2016. As a result, Consumers recognized an $8 million increase in the credit, net of reserves for uncertain tax positions, at that time.

Consumers Energy Company

Income Taxes [Line Items]

Income Taxes

Income Taxes

Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations:

Six Months Ended June 30	2019		2018
CMS Energy, including Consumers
U.S. federal income tax rate	21.0	%	21.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	5.4		5.6
TCJA excess deferred taxes1	(3.5	)	(3.4	)
Production tax credits	(2.5	)	(1.7	)
Accelerated flow-through of regulatory tax benefits2	(1.5	)	(5.0	)
Research and development tax credits, net3	(0.2	)	(2.2	)
Other, net	(0.6	)	0.3
Effective tax rate	18.1	%	14.6	%
Consumers
U.S. federal income tax rate	21.0	%	21.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	5.7		5.8
TCJA excess deferred taxes1	(3.2	)	(3.2	)
Accelerated flow-through of regulatory tax benefits2	(1.8	)	(4.7	)
Production tax credits	(1.3	)	(1.5	)
Research and development tax credits, net3	(0.2	)	(2.1	)
Other, net	(0.4	)	—
Effective tax rate	19.8	%	15.3	%

¹  In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a $1.8 billion regulatory liability. This regulatory liability relates to the excess deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the Internal Revenue Code. The normalization provisions require that the excess deferred taxes be refunded to customers over the remaining average service life of the associated assets. In January 2018, Consumers began to reduce this regulatory liability by crediting income tax expense. Consumers has fully reserved for the eventual refund of these excess deferred taxes that it has credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue, and will continue to do so until these benefits are passed on to customers in accordance with an MPSC order, expected to be issued in 2019. At June 30, 2019, this reserve for refund of these excess deferred taxes totaled $53 million.

²  In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow‑through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014, with the electric portion ending in 2018. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $7 million for the six months ended June 30, 2019 and by $22 million for the six months ended June 30, 2018.

³ 

In March 2018, Consumers finalized a study of research and development tax credits for the tax years 2012 through 2016. As a result, Consumers recognized an $8 million increase in the credit, net of reserves for uncertain tax positions, at that time.