Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Tax Provision

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)		2019		2018		2017		2019		2018		2017
Current payable:
Federal	$	8,017	$	18,622	$	21,125	$	7,616	$	19,926	$	21,512
State		4,647		5,163		5,129		4,608		5,704		5,316
Net-deferred:
Federal		3,510		120		(8,346)		2,242		(2,563)		(11,195)
State		3,702		3,629		4,264		3,044		2,494		3,435
Amortized investment tax credits		(92)		(100)		(78)		(92)		(100)		(78)
Total income tax provision	$	19,784	$	27,434	$	22,094	$	17,418	$	25,461	$	18,990

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
	2019		2018		2017		2019		2018		2017
Statutory federal income tax rate	21.0	%	21.0	%	35.0	%	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	6.2		6.3		5.1		6.1		6.2		5.1
Amortized investment tax credits	(0.1)		(0.1)		-		(0.1)		(0.1)		-
Credit for electricity from wind energy(a)	(5.7)		(0.3)		(1.6)		(6.2)		(0.4)		(1.7)
Domestic manufacturing deduction	-		-		(1.4)		-		-		(1.5)
AFUDC equity, net	(0.3)		(0.6)		(0.2)		(0.3)		(0.5)		(0.2)
Federal income tax rate reduction	-		-		(18.1)		-		-		(19.3)
Amortization of utility excess deferred tax(b)	(2.4)		(1.8)		-		(2.7)		(2.0)		-
Other, net, individually insignificant	(0.1)		0.1		(0.3)		(0.1)		0.2		(0.4)
Effective income tax rate	18.6	%	24.6	%	18.5	%	17.7	%	24.4	%	17.0	%

(a)Saratoga became operational in February 2019.

(b)Included are impacts of the Tax Cuts and Jobs Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting. For the years ended December 31, 2019 and 2018, MGE recognized $2.6 million and $2.1 million, respectively. The amount and timing of the cash impacts will depend on the period over which certain income tax benefits are provided to customers, as determined by the PSCW.

Deferred Tax Liabilities (Assets)

The significant components of deferred tax liabilities (assets) that appear on the consolidated balance sheets as of December 31 are as follows:

		MGE Energy				MGE
(In thousands)		2019		2018		2019		2018
Deferred tax assets
Investment in ATC	$	22,576	$	23,638	$	-	$	-
Accrued expenses		15,901		15,385		15,890		15,385
Pension and other postretirement benefits		30,968		34,914		30,968		34,914
Deferred tax regulatory account		35,493		37,121		35,493		37,121
Derivatives		7,351		8,861		7,351		8,861
Leases		5,167		-		5,167		-
Other		12,540		15,137		12,593		15,185
Gross deferred income tax assets		129,996		135,056		107,462		111,466
Less valuation allowance		(86)		(86)		(86)		(86)
Net deferred income tax assets	$	129,910	$	134,970	$	107,376	$	111,380
Deferred tax liabilities
Property-related	$	245,083	$	244,114	$	245,083	$	244,114
Investment in ATC		51,569		50,771		-		-
Bond transactions		657		765		657		765
Pension and other postretirement benefits		45,683		47,644		45,683		47,644
Derivatives		7,351		8,861		7,351		8,861
Tax deductible prepayments		9,078		6,014		9,051		6,014
Leases		5,167		-		5,167		-
Other		8,624		8,753		8,425		8,598
Gross deferred income tax liabilities		373,212		366,922		321,417		315,996
Deferred income taxes	$	243,302	$	231,952	$	214,041	$	204,616

Unrecognized Tax Benefits and Interest

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

(In thousands)
Unrecognized Tax Benefits:		2019		2018		2017
Unrecognized tax benefits, January 1,	$	1,949	$	1,924	$	2,487
Additions based on tax positions related to the current year		741		425		552
Additions based on tax positions related to the prior years		84		272		19
Reductions based on tax positions related to the prior years		(681)		(672)		(1,134)
Unrecognized tax benefits, December 31,	$	2,093	$	1,949	$	1,924
(In thousands)
Interest on Unrecognized Tax Benefits:		2019		2018		2017
Accrued interest on unrecognized tax benefits, January 1,	$	191	$	165	$	388
Reduction in interest expense on uncertain tax positions		(137)		(136)		(312)
Interest expense on uncertain tax positions		122		162		89
Accrued interest on unrecognized tax benefits, December 31,	$	176	$	191	$	165

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	2016 through 2019
MGE Energy Wisconsin combined reporting corporation return	2017 through 2019