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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

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

		MGE Energy						MGE
(In thousands)		2018		2017		2016		2018		2017		2016
Current payable:
Federal	$	18,622	$	21,125	$	16,908	$	19,926	$	21,512	$	17,521
State		5,163		5,129		3,287		5,704		5,316		3,497
Net-deferred:
Federal		120		(8,346)		17,571		(2,563)		(11,195)		16,391
State		3,629		4,264		4,850		2,494		3,435		4,485
Amortized investment tax credits		(100)		(78)		(103)		(100)		(78)		(103)
Total income tax provision	$	27,434	$	22,094	$	42,513	$	25,461	$	18,990	$	41,791

Effective Tax Rate Reconciliation

The 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
	2018	2017	2016	2018	2017	2016
Statutory federal income tax rate	21.0 %	35.0 %	35.0 %	21.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	6.3 %	5.1 %	5.1 %	6.2 %	5.1 %	5.1 %
Amortized investment tax credits	(0.1)%	-%	(0.1)%	(0.1)%	-%	(0.1)%
Credit for electricity from wind energy	(0.3)%	(1.6)%	(1.6)%	(0.4)%	(1.7)%	(1.7)%
Domestic manufacturing deduction	-%	(1.4)%	(1.3)%	-%	(1.5)%	(1.3)%
AFUDC equity, net	(0.6)%	(0.2)%	(0.2)%	(0.5)%	(0.2)%	(0.2)%
Federal income tax rate reduction	-%	(18.1)%	-%	-%	(19.3)%	-%
Amortization of utility excess deferred tax^(a)	(1.8)%	-%	-%	(2.0)%	-%	-%
Other, net, individually insignificant	0.1 %	(0.3)%	(0.9)%	0.2 %	(0.4)%	(0.9)%
Effective income tax rate	24.6 %	18.5 %	36.0 %	24.4 %	17.0 %	35.9 %

(a) Included are impacts of the Tax Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting.

Deferred Tax Liabilities (Assets)

		MGE Energy				MGE
(In thousands)		2018		2017		2018		2017
Deferred tax assets
Investment in ATC		23,638		24,781		-		-
Accrued expenses		15,385		15,135		15,385		15,135
Pension and other postretirement benefits		34,914		32,196		34,914		32,196
Deferred tax regulatory account		37,121		36,124		37,121		36,124
Derivatives		8,861		11,525		8,861		11,525
Other		15,137		12,790		15,185		12,831
Gross deferred income tax assets		135,056		132,551		111,466		107,811
Less valuation allowance		(86)		(86)		(86)		(86)
Net deferred income tax assets		134,970		132,465		111,380		107,725

Deferred tax liabilities
Property-related	$	244,114	$	238,437	$	244,114	$	238,544
Investment in ATC		50,771		48,324		-		-
Bond transactions		765		832		765		832
Pension and other postretirement benefits		47,644		42,919		47,644		42,919
Derivatives		8,861		11,525		8,861		11,525
Tax deductible prepayments		6,014		6,169		6,014		6,169
Other		8,753		9,389		8,598		9,222
Gross deferred income tax liabilities		366,922		357,595		315,996		309,211
Deferred income taxes	$	231,952	$	225,130	$	204,616	$	201,486

Schedule Of Remeasurements Of Deferred Income Taxes Due To Tax Reform [Table Text Block]

The one-time impacts recorded to remeasure deferred income tax balances at the 21 percent corporate federal income tax rate as of December 31, 2017 were as follows:

(In thousands)		MGE Energy		MGE
Net Decrease in Deferred Tax Liability	$	176,871	$	156,493
Decrease in Regulatory Asset		4,347		4,347
Increase in Regulatory Liability^(b)		130,497		130,497
Decrease in Investment ATC		20,375		-
Net Deferred Income Tax Benefit Recorded^(c)		21,651		21,649

(b) Given that changes in income taxes are generally passed through in customer rates for the regulated utility, a regulatory liability was recorded. The amount and timing of the cash impacts will depend on the period over which certain income tax benefits are provided to customers, which will be subject to review by the PSCW. A portion of the regulatory liability will be returned to customers based on a mandated timeframe dictated by applicable tax laws.

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and is as follows:

(In thousands)
Unrecognized Tax Benefits:		2018		2017		2016
Unrecognized tax benefits, January 1,	$	1,924	$	2,487	$	2,528
Additions based on tax positions related to the current year		425		552		452
Additions based on tax positions related to the prior years		272		19		39
Reductions based on tax positions related to the prior years		(672)		(1,134)		(532)
Unrecognized tax benefits, December 31,	$	1,949	$	1,924	$	2,487

(In thousands)
Interest on Unrecognized Tax Benefits:		2018		2017		2016
Accrued interest on unrecognized tax benefits, January 1,	$	165	$	388	$	311
Reduction in interest expense on uncertain tax positions		(136)		(312)		(27)
Interest expense on uncertain tax positions		162		89		104
Accrued interest on unrecognized tax benefits, December 31,	$	191	$	165	$	388

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	2015 through 2018
	MGE Energy Wisconsin combined reporting corporation return	2013 through 2018