Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

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)		2020		2019		2018		2020		2019		2018
Current payable:
Federal	$	4,179	$	8,017	$	18,622	$	3,716	$	7,616	$	19,926
State		5,095		4,647		5,163		4,790		4,608		5,704
Net-deferred:
Federal		6,181		3,510		120		4,756		2,242		(2,563)
State		4,182		3,702		3,629		3,787		3,044		2,494
Amortized investment tax credits		(214)		(92)		(100)		(214)		(92)		(100)
Total income tax provision	$	19,423	$	19,784	$	27,434	$	16,835	$	17,418	$	25,461

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
	2020		2019		2018		2020		2019		2018
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	6.3		6.2		6.3		6.3		6.1		6.2
Amortized investment tax credits	(0.2)		(0.1)		(0.1)		(0.2)		(0.1)		(0.1)
Credit for electricity from wind energy(a)	(6.2)		(5.7)		(0.3)		(6.8)		(6.2)		(0.4)
AFUDC equity, net	(1.2)		(0.3)		(0.6)		(1.4)		(0.3)		(0.5)
Amortization of utility excess deferred tax(b)	(2.0)		(2.4)		(1.8)		(2.2)		(2.7)		(2.0)
Other, net, individually insignificant	(0.3)		(0.1)		0.1		(0.3)		(0.1)		0.2
Effective income tax rate	17.4	%	18.6	%	24.6	%	16.4	%	17.7	%	24.4	%

(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, 2020, 2019, and 2018, MGE recognized $2.2 million, $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 assets and liabilities that appear on the consolidated balance sheets as of December 31 are as follows:

		MGE Energy				MGE
(In thousands)		2020		2019		2020		2019
Deferred tax assets
Investment in ATC	$	21,688	$	22,576	$	-	$	-
Federal tax credits		19,199		-		20,080		-
Accrued expenses		11,115		15,901		11,105		15,890
Pension and other postretirement benefits		35,446		30,968		35,446		30,968
Deferred tax regulatory account		41,318		35,493		41,318		35,493
Derivatives		3,852		7,351		3,852		7,351
Leases		6,704		5,167		6,704		5,167
Other		14,073		12,540		14,125		12,593
Gross deferred income tax assets		153,395		129,996		132,630		107,462
Less valuation allowance		(38)		(86)		(38)		(86)
Net deferred income tax assets	$	153,357	$	129,910	$	132,592	$	107,376

Deferred tax liabilities
Property-related	$	257,397	$	245,083	$	257,397	$	245,083
Investment in ATC		51,518		51,569		-		-
Bond transactions		595		657		595		657
Pension and other postretirement benefits		45,658		45,683		45,658		45,683
Derivatives		3,852		7,351		3,852		7,351
Tax deductible prepayments		9,059		9,078		9,059		9,051
Leases		6,704		5,167		6,704		5,167
Other		10,045		8,624		9,717		8,425
Gross deferred income tax liabilities		384,828		373,212		332,982		321,417
Deferred income taxes	$	231,471	$	243,302	$	200,390	$	214,041

Summary Of Tax Credit Carryforwards

The components of federal and state tax benefit carryovers as of December 31, are as follows:

		MGE Energy				MGE
(In thousands)		2020		2019		2020		2019
Federal tax credits	$	19,199	$	-	$	20,080	$	-
State net operating losses		621		1,406		621		1,406
Valuation allowances for state net operating losses		(621)		(1,406)		(621)		(1,406)

Unrecognized Tax Benefits and Interest

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

(In thousands)
Unrecognized Tax Benefits:		2020		2019		2018
Unrecognized tax benefits, January 1,	$	2,093	$	1,949	$	1,924
Additions based on tax positions related to the current year		796		741		425
Additions based on tax positions related to the prior years		-		84		272
Reductions based on tax positions related to the prior years		(608)		(681)		(672)
Unrecognized tax benefits, December 31,	$	2,281	$	2,093	$	1,949
(In thousands)
Interest on Unrecognized Tax Benefits:		2020		2019		2018
Accrued interest on unrecognized tax benefits, January 1,	$	176	$	191	$	165
Reduction in interest expense on uncertain tax positions		(124)		(137)		(136)
Interest expense on uncertain tax positions		102		122		162
Accrued interest on unrecognized tax benefits, December 31,	$	154	$	176	$	191

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	2017 through 2020
MGE Energy Wisconsin combined reporting corporation return	2017 through 2020