Income Taxes

9 Months Ended

Sep. 30, 2017

Income Taxes

9: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:

Nine Months Ended September 30	2017			2016
CMS Energy, including Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		2.3			4.2
Accelerated flow-through of regulatory tax benefits2		(4.3)			(4.7)
Employee share-based awards		(0.9)			(0.8)
Other, net		(2.0)			(1.4)
Effective tax rate		30.1	%		32.3	%
Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		2.3			4.6
Accelerated flow-through of regulatory tax benefits2		(3.9)			(4.0)
Employee share-based awards		(0.8)			(0.7)
Other, net		(2.3)			(1.2)
Effective tax rate		30.3	%		33.7	%

1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.

2Since 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 $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.

Consumers Energy Company [Member]

Income Taxes

9: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:

Nine Months Ended September 30	2017			2016
CMS Energy, including Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		2.3			4.2
Accelerated flow-through of regulatory tax benefits2		(4.3)			(4.7)
Employee share-based awards		(0.9)			(0.8)
Other, net		(2.0)			(1.4)
Effective tax rate		30.1	%		32.3	%
Consumers
U.S. federal income tax rate		35.0	%		35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		2.3			4.6
Accelerated flow-through of regulatory tax benefits2		(3.9)			(4.0)
Employee share-based awards		(0.8)			(0.7)
Other, net		(2.3)			(1.2)
Effective tax rate		30.3	%		33.7	%

1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.

2Since 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 $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.