Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

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)		2015		2014		2013		2015		2014		2013
Current payable:
Federal	$	16,837	$	(891)	$	(1,508)	$	19,295	$	637	$	(448)
State		2,774		(589)		8,213		3,443		(451)		8,322
Net-deferred:
Federal		15,951		39,284		37,203		13,538		38,553		36,937
State		5,976		10,600		1,163		5,305		10,625		1,223
Amortized investment tax credits		(175)		(219)		(212)		(175)		(219)		(212)
Total income tax provision	$	41,363	$	48,185	$	44,859	$	41,406	$	49,145	$	45,822

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
	2015	2014	2013	2015	2014	2013
Statutory federal income tax rate	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	5.2 %	5.1 %	5.1 %	5.2 %	5.1 %	5.1 %
Amortized investment tax credits	(0.2)%	(0.2)%	(0.2)%	(0.2)%	(0.2)%	(0.2)%
Credit for electricity from wind energy	(1.8)%	(1.7)%	(1.5)%	(1.8)%	(1.7)%	(1.5)%
Domestic manufacturing deduction	(1.4)%	-%	(0.2)%	(1.4)%	-%	(0.2)%
AFUDC equity, net	(0.1)%	(0.8)%	(0.7)%	(0.1)%	(0.8)%	(0.7)%
Other, net, individually insignificant	-%	0.1 %	-%	-%	0.1 %	-%
Effective income tax rate	36.7 %	37.5 %	37.5 %	36.7 %	37.5 %	37.5 %

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 are as follows:

		MGE Energy				MGE
(In thousands)		2015		2014		2015		2014
Property-related	$	327,918	$	312,903	$	327,822	$	312,807
Investment in ATC		38,213		36,140		30,382		29,156
Bond transactions		1,422		1,420		1,422		1,420
Pension and other postretirement benefits		57,697		57,847		57,697		57,847
Derivatives		21,660		22,331		21,660		22,331
Tax deductible prepayments		8,011		8,077		8,011		8,077
Other		14,997		10,451		14,831		10,259
Gross deferred income tax liabilities		469,918		449,169		461,825		441,897
Future tax benefit		-		(4,092)		-		(4,092)
Accrued expenses		(21,391)		(32,091)		(21,391)		(32,091)
Pension and other postretirement benefits		(46,582)		(44,994)		(46,582)		(44,994)
Deferred tax regulatory account		(1,047)		(1,211)		(1,047)		(1,211)
Derivatives		(21,660)		(22,331)		(21,660)		(22,331)
Other		(18,523)		(5,957)		(18,589)		(3,746)
Gross deferred income tax assets		(109,203)		(110,676)		(109,269)		(108,465)
Less valuation allowance		70		70		70		70
Net deferred income tax assets		(109,133)		(110,606)		(109,199)		(108,395)
Deferred income taxes	$	360,785	$	338,563	$	352,626	$	333,502

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and interest from January 1, 2013 to December 31, 2015, is as follows:

(In thousands)
Unrecognized Tax Benefits:		2015		2014		2013
Unrecognized tax benefits, January 1,	$	2,365	$	2,363	$	3,204
Additions based on tax positions related to the current year		488		610		377
Additions based on tax positions related to the prior years		520		618		424
Reductions based on tax positions related to the current year		-		-		(40)
Reductions based on tax positions related to the prior years		(845)		(1,226)		(1,602)
Unrecognized tax benefits, December 31,	$	2,528	$	2,365	$	2,363

(In thousands)
Interest on Unrecognized Tax Benefits:		2015		2014		2013
Accrued interest on unrecognized tax benefits, January 1,	$	92	$	101	$	314
Reduction in interest expense on uncertain tax positions		(102)		(97)		(275)
Interest expense on uncertain tax positions		321		88		62
Accrued interest on unrecognized tax benefits, December 31,	$	311	$	92	$	101

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	2012 through 2015
	MGE Energy Wisconsin combined reporting corporation return	2011 through 2015