XML 69 R22.htm IDEA: XBRL DOCUMENT v3.6.0.2
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Taxes

14:Income  Taxes

CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return and a unitary Michigan income tax return. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.

Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions, Except Tax Rate 

 

 

Years Ended December 31

2016 

 

2015 

 

2014 

 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

$

826 

 

 

$

796 

 

 

$

729 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense at statutory rate

 

 

289 

 

 

 

279 

 

 

 

255 

 

 

Increase (decrease) in income taxes from:

 

 

 

 

 

 

 

 

 

 

 

 

 

State and local income taxes, net of federal effect

 

 

37 

 

 

 

39 

 

 

 

36 

 

 

Accelerated flow-through of regulatory tax benefits1

 

 

(39)

 

 

 

(39)

 

 

 

(39)

 

 

Employee share-based awards2

 

 

(7)

 

 

 

 -

 

 

 

 -

 

 

Other, net

 

 

(7)

 

 

 

(8)

 

 

 

(2)

 

 

Income tax expense

 

$

273 

 

 

$

271 

 

 

$

250 

 

 

Effective tax rate

 

 

33.1 

%

 

 

34.0 

%

 

 

34.3 

%

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

$

936 

 

 

$

896 

 

 

$

873 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense at statutory rate

 

 

328 

 

 

 

314 

 

 

 

306 

 

 

Increase (decrease) in income taxes from:

 

 

 

 

 

 

 

 

 

 

 

 

 

State and local income taxes, net of federal effect

 

 

44 

 

 

 

42 

 

 

 

42 

 

 

Accelerated flow-through of regulatory tax benefits1

 

 

(39)

 

 

 

(39)

 

 

 

(39)

 

 

Employee share-based awards2

 

 

(6)

 

 

 

 -

 

 

 

 -

 

 

Other, net

 

 

(7)

 

 

 

(15)

 

 

 

(3)

 

 

Income tax expense

 

$

320 

 

 

$

302 

 

 

$

306 

 

 

Effective tax rate

 

 

34.2 

%

 

 

33.7 

%

 

 

35.1 

%

 



1

Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2016, 2015, and 2014.

2

CMS Energy and Consumers elected to adopt ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as of January 1, 2016. For further details on the implementation of this standard, see Note 2, New Accounting Standards.

Presented in the following table are the significant components of income tax expense on continuing operations:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 -

 

$

 -

 

$

 -

 

State and local

 

 

 

 

24 

 

 

24 

 



 

$

 

$

24 

 

$

24 

 

Deferred income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

200 

 

$

192 

 

$

198 

 

State and local

 

 

47 

 

 

36 

 

 

31 

 



 

$

247 

 

$

228 

 

$

229 

 

Deferred income tax credit

 

 

17 

 

 

19 

 

 

(3)

 

Tax expense

 

$

273 

 

$

271 

 

$

250 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 

$

66 

 

$

 

State and local

 

 

22 

 

 

32 

 

 

36 

 



 

$

31 

 

$

98 

 

$

44 

 

Deferred income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

227 

 

$

153 

 

$

236 

 

State and local

 

 

45 

 

 

32 

 

 

29 

 



 

$

272 

 

$

185 

 

$

265 

 

Deferred income tax credit

 

 

17 

 

 

19 

 

 

(3)

 

Tax expense

 

$

320 

 

$

302 

 

$

306 

 



Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Employee benefits

 

$

(158)

 

$

(127)

 

Gas inventory

 

 

(65)

 

 

(96)

 

Plant, property, and equipment

 

 

(2,902)

 

 

(2,429)

 

Net regulatory tax liability

 

 

27 

 

 

50 

 

Reserves and accruals

 

 

69 

 

 

59 

 

Securitized costs

 

 

(118)

 

 

(122)

 

Tax loss and credit carryforwards

 

 

871 

 

 

657 

 

Other

 

 

(6)

 

 

(5)

 



 

$

(2,282)

 

$

(2,013)

 

Less valuation allowance

 

 

(5)

 

 

(4)

 

Total net deferred income tax liabilities

 

$

(2,287)

 

$

(2,017)

 

Deferred tax assets, net of valuation reserves

 

$

962 

 

$

762 

 

Deferred tax liabilities

 

 

(3,249)

 

 

(2,779)

 

Total net deferred income tax liabilities

 

$

(2,287)

 

$

(2,017)

 

Consumers

 

 

 

 

 

 

 

Employee benefits

 

$

(181)

 

$

(156)

 

Gas inventory

 

 

(65)

 

 

(96)

 

Plant, property, and equipment

 

 

(2,924)

 

 

(2,457)

 

Net regulatory tax liability

 

 

27 

 

 

50 

 

Reserves and accruals

 

 

37 

 

 

30 

 

Securitized costs

 

 

(118)

 

 

(122)

 

Tax loss and credit carryforwards

 

 

190 

 

 

46 

 

Other

 

 

(8)

 

 

(5)

 

Total net deferred income tax liabilities

 

$

(3,042)

 

$

(2,710)

 

Deferred tax assets, net of valuation reserves

 

$

254 

 

$

126 

 

Deferred tax liabilities

 

 

(3,296)

 

 

(2,836)

 

Total net deferred income tax liabilities

 

$

(3,042)

 

$

(2,710)

 



Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements.

Presented in the following table are the tax loss and credit carryforwards at December 31, 2016:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

In Millions  



Gross Amount 

Tax Attribute 

Expiration 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

Federal net operating loss carryforward

 

$

1,415 

 

$

495 

2025 – 2036 

 

Local net operating loss carryforwards

 

 

408 

 

 

2023 – 2036 

 

Alternative minimum tax credits

 

 

270 

 

 

270 

No expiration 

 

General business credits

 

 

102 

 

 

102 

2018 – 2036 

 

Total tax attributes

 

 

 

 

$

871 

 

 

Consumers

 

 

 

 

 

 

 

 

Federal net operating loss carryforward

 

$

447 

 

$

157 

2025 – 2036 

 

General business credits

 

 

33 

 

 

33 

2032 – 2036 

 

Total tax attributes

 

 

 

 

$

190 

 

 



CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward, and $3 million for general business credits. CMS Energy and Consumers expect to utilize fully tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

 

$

 

$

 

Additions for current-year tax positions

 

 

 -

 

 

 

 

 

Additions for prior-year tax positions

 

 

 -

 

 

 

 

 

Reductions for prior-year tax positions

 

 

 -

 

 

(1)

 

 

(2)

 

Settlements

 

 

(1)

 

 

 -

 

 

 -

 

Balance at end of period

 

$

 

$

 

$

 

Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

 

$

 

$

 

Additions for current-year tax positions

 

 

 -

 

 

 

 

 

Additions for prior-year tax positions

 

 

 -

 

 

 

 

 

Reductions for prior-year tax positions

 

 

 -

 

 

(1)

 

 

(2)

 

Settlements

 

 

(1)

 

 

 -

 

 

 -

 

Balance at end of period

 

$

 

$

 

$

 



If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2016,  2015, or 2014.

In April 2014, the IRS completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011. The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense.

CMS Energy’s federal income tax returns for 2013 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax and Michigan Business Tax returns for 2008 and subsequent years remain subject to examination by the State of Michigan.

The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2016 were adequate for all years.

Consumers Energy Company [Member]  
Income Taxes

14:Income  Taxes

CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return and a unitary Michigan income tax return. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.

Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions, Except Tax Rate 

 

 

Years Ended December 31

2016 

 

2015 

 

2014 

 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

$

826 

 

 

$

796 

 

 

$

729 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense at statutory rate

 

 

289 

 

 

 

279 

 

 

 

255 

 

 

Increase (decrease) in income taxes from:

 

 

 

 

 

 

 

 

 

 

 

 

 

State and local income taxes, net of federal effect

 

 

37 

 

 

 

39 

 

 

 

36 

 

 

Accelerated flow-through of regulatory tax benefits1

 

 

(39)

 

 

 

(39)

 

 

 

(39)

 

 

Employee share-based awards2

 

 

(7)

 

 

 

 -

 

 

 

 -

 

 

Other, net

 

 

(7)

 

 

 

(8)

 

 

 

(2)

 

 

Income tax expense

 

$

273 

 

 

$

271 

 

 

$

250 

 

 

Effective tax rate

 

 

33.1 

%

 

 

34.0 

%

 

 

34.3 

%

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

$

936 

 

 

$

896 

 

 

$

873 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense at statutory rate

 

 

328 

 

 

 

314 

 

 

 

306 

 

 

Increase (decrease) in income taxes from:

 

 

 

 

 

 

 

 

 

 

 

 

 

State and local income taxes, net of federal effect

 

 

44 

 

 

 

42 

 

 

 

42 

 

 

Accelerated flow-through of regulatory tax benefits1

 

 

(39)

 

 

 

(39)

 

 

 

(39)

 

 

Employee share-based awards2

 

 

(6)

 

 

 

 -

 

 

 

 -

 

 

Other, net

 

 

(7)

 

 

 

(15)

 

 

 

(3)

 

 

Income tax expense

 

$

320 

 

 

$

302 

 

 

$

306 

 

 

Effective tax rate

 

 

34.2 

%

 

 

33.7 

%

 

 

35.1 

%

 



1

Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2016, 2015, and 2014.

2

CMS Energy and Consumers elected to adopt ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as of January 1, 2016. For further details on the implementation of this standard, see Note 2, New Accounting Standards.

Presented in the following table are the significant components of income tax expense on continuing operations:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 -

 

$

 -

 

$

 -

 

State and local

 

 

 

 

24 

 

 

24 

 



 

$

 

$

24 

 

$

24 

 

Deferred income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

200 

 

$

192 

 

$

198 

 

State and local

 

 

47 

 

 

36 

 

 

31 

 



 

$

247 

 

$

228 

 

$

229 

 

Deferred income tax credit

 

 

17 

 

 

19 

 

 

(3)

 

Tax expense

 

$

273 

 

$

271 

 

$

250 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 

$

66 

 

$

 

State and local

 

 

22 

 

 

32 

 

 

36 

 



 

$

31 

 

$

98 

 

$

44 

 

Deferred income taxes

 

 

 

 

 

 

 

 

 

 

Federal

 

$

227 

 

$

153 

 

$

236 

 

State and local

 

 

45 

 

 

32 

 

 

29 

 



 

$

272 

 

$

185 

 

$

265 

 

Deferred income tax credit

 

 

17 

 

 

19 

 

 

(3)

 

Tax expense

 

$

320 

 

$

302 

 

$

306 

 



Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:



 

 

 

 

 

 

 



 

 

 

 

 

 

 

In Millions  

December 31

2016  2015 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

Employee benefits

 

$

(158)

 

$

(127)

 

Gas inventory

 

 

(65)

 

 

(96)

 

Plant, property, and equipment

 

 

(2,902)

 

 

(2,429)

 

Net regulatory tax liability

 

 

27 

 

 

50 

 

Reserves and accruals

 

 

69 

 

 

59 

 

Securitized costs

 

 

(118)

 

 

(122)

 

Tax loss and credit carryforwards

 

 

871 

 

 

657 

 

Other

 

 

(6)

 

 

(5)

 



 

$

(2,282)

 

$

(2,013)

 

Less valuation allowance

 

 

(5)

 

 

(4)

 

Total net deferred income tax liabilities

 

$

(2,287)

 

$

(2,017)

 

Deferred tax assets, net of valuation reserves

 

$

962 

 

$

762 

 

Deferred tax liabilities

 

 

(3,249)

 

 

(2,779)

 

Total net deferred income tax liabilities

 

$

(2,287)

 

$

(2,017)

 

Consumers

 

 

 

 

 

 

 

Employee benefits

 

$

(181)

 

$

(156)

 

Gas inventory

 

 

(65)

 

 

(96)

 

Plant, property, and equipment

 

 

(2,924)

 

 

(2,457)

 

Net regulatory tax liability

 

 

27 

 

 

50 

 

Reserves and accruals

 

 

37 

 

 

30 

 

Securitized costs

 

 

(118)

 

 

(122)

 

Tax loss and credit carryforwards

 

 

190 

 

 

46 

 

Other

 

 

(8)

 

 

(5)

 

Total net deferred income tax liabilities

 

$

(3,042)

 

$

(2,710)

 

Deferred tax assets, net of valuation reserves

 

$

254 

 

$

126 

 

Deferred tax liabilities

 

 

(3,296)

 

 

(2,836)

 

Total net deferred income tax liabilities

 

$

(3,042)

 

$

(2,710)

 



Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements.

Presented in the following table are the tax loss and credit carryforwards at December 31, 2016:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

In Millions  



Gross Amount 

Tax Attribute 

Expiration 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

Federal net operating loss carryforward

 

$

1,415 

 

$

495 

2025 – 2036 

 

Local net operating loss carryforwards

 

 

408 

 

 

2023 – 2036 

 

Alternative minimum tax credits

 

 

270 

 

 

270 

No expiration 

 

General business credits

 

 

102 

 

 

102 

2018 – 2036 

 

Total tax attributes

 

 

 

 

$

871 

 

 

Consumers

 

 

 

 

 

 

 

 

Federal net operating loss carryforward

 

$

447 

 

$

157 

2025 – 2036 

 

General business credits

 

 

33 

 

 

33 

2032 – 2036 

 

Total tax attributes

 

 

 

 

$

190 

 

 



CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward, and $3 million for general business credits. CMS Energy and Consumers expect to utilize fully tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

 

$

 

$

 

Additions for current-year tax positions

 

 

 -

 

 

 

 

 

Additions for prior-year tax positions

 

 

 -

 

 

 

 

 

Reductions for prior-year tax positions

 

 

 -

 

 

(1)

 

 

(2)

 

Settlements

 

 

(1)

 

 

 -

 

 

 -

 

Balance at end of period

 

$

 

$

 

$

 

Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

 

$

 

$

 

Additions for current-year tax positions

 

 

 -

 

 

 

 

 

Additions for prior-year tax positions

 

 

 -

 

 

 

 

 

Reductions for prior-year tax positions

 

 

 -

 

 

(1)

 

 

(2)

 

Settlements

 

 

(1)

 

 

 -

 

 

 -

 

Balance at end of period

 

$

 

$

 

$

 



If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2016,  2015, or 2014.

In April 2014, the IRS completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011. The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense.

CMS Energy’s federal income tax returns for 2013 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax and Michigan Business Tax returns for 2008 and subsequent years remain subject to examination by the State of Michigan.

The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2016 were adequate for all years.