Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

On a consolidated and separate company basis, MGE Energy’s and MGE’s income tax provision consists of the following provision (benefit) components for the years ended December 31:

		MGE Energy						MGE
(In thousands)		2014		2013		2012		2014		2013		2012
Current payable:
Federal	$	(891)	$	(1,508)	$	(6,053)	$	637	$	(448)	$	(5,030)
State		(589)		8,213		436		(451)		8,322		613
Net-deferred:
Federal		39,284		37,203		37,178		38,553		36,937		36,589
State		10,600		1,163		7,618		10,625		1,223		7,523
Amortized investment tax credits		(219)		(212)		(260)		(219)		(212)		(260)
Total income tax provision	$	48,185	$	44,859	$	38,919	$	49,145	$	45,822	$	39,435

Effective Tax Rate Reconciliation

MGE Energy’s and MGE’s consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:

	MGE Energy			MGE
	2014	2013	2012	2014	2013	2012
Statutory federal income tax rate	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	5.1 %	5.1 %	5.0 %	5.1 %	5.1 %	5.0 %
Amortized investment tax credits	(0.2)%	(0.2)%	(0.3)%	(0.2)%	(0.2)%	(0.2)%
Credit for electricity from wind energy	(1.7)%	(1.5)%	(1.6)%	(1.7)%	(1.5)%	(1.5)%
Domestic manufacturing deduction	-%	(0.2)%	0.3 %	-%	(0.2)%	0.3 %
AFUDC equity, net	(0.8)%	(0.7)%	(0.4)%	(0.8)%	(0.7)%	(0.4)%
Other, net, individually insignificant	0.1 %	-%	(0.3)%	0.1 %	-%	(0.5)%
Effective income tax rate	37.5 %	37.5 %	37.7 %	37.5 %	37.5 %	37.7 %

Deferred Tax Liabilities (Assets)

The significant components of deferred tax liabilities (assets) that appear on MGE Energy’s and MGE’s consolidated balance sheets as of December 31 as follows:

		MGE Energy				MGE
(In thousands)		2014		2013		2014		2013
Property-related	$	312,903	$	263,881	$	312,807	$	263,881
Investment in ATC		36,140		32,696		29,156		27,073
Bond transactions		1,420		1,553		1,420		1,553
Pension and other postretirement benefits		57,847		34,478		57,847		34,478
Derivatives		22,331		26,361		22,331		26,361
Tax deductible prepayments		8,077		7,508		8,077		7,508
Other		10,451		1,995		10,259		1,911
Gross deferred income tax liabilities		449,169		368,472		441,897		362,765
Future tax benefit		(4,092)		-		(4,092)		-
Accrued expenses		(32,091)		(17,195)		(32,091)		(17,195)
Pension and other postretirement benefits		(44,994)		(26,838)		(44,994)		(26,838)
Deferred tax regulatory account		(1,211)		(1,402)		(1,211)		(1,402)
Derivatives		(22,331)		(26,361)		(22,331)		(26,361)
Other		(5,957)		(10,369)		(3,746)		(9,356)
Gross deferred income tax assets		(110,676)		(82,165)		(108,465)		(81,152)
Less valuation allowance		70		195		70		195
Net deferred income tax assets		(110,606)		(81,970)		(108,395)		(80,957)
Deferred income taxes	$	338,563	$	286,502	$	333,502	$	281,808

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and interest from January 1, 2012 to December 31, 2014, is as follows:

(In thousands)
Unrecognized tax benefits:		2014		2013		2012
Unrecognized tax benefits, January 1,	$	2,363	$	3,204	$	2,364
Additions based on tax positions related to the current year		610		377		401
Additions based on tax positions related to the prior years		618		424		580
Reductions based on tax positions related to the current year		-		(40)		-
Reductions based on tax positions related to the prior years		(1,226)		(1,602)		(141)
Unrecognized tax benefits, December 31,	$	2,365	$	2,363	$	3,204

(In thousands)
Interest on unrecognized tax benefits:		2014		2013		2012
Accrued interest on unrecognized tax benefits, January 1,	$	101	$	314	$	216
Reduction in interest expense on uncertain tax positions		(97)		(275)		-
Interest expense on uncertain tax positions		88		62		98
Accrued interest on unrecognized tax benefits, December 31,	$	92	$	101	$	314

Tax Years that Remain Subject to Examination

The following table shows tax years that remain subject to examination by major jurisdiction:

	Taxpayer	Open Years
	MGE Energy and consolidated subsidiaries in federal return	2011 through 2014
	MGE Energy Wisconsin combined reporting corporation return	2010 through 2014

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

+ References+ Details