Income tax (benefit) expense differs from the amount computed by applying the statutory rate on book income subject to tax for the following reasons:

	(Thousands of Dollars)
	Years Ended December 31,
	2020			2019			2018
Income Tax at Statutory Rate	$	7,204		$	6,457		$	7,009
Tax Effect of:
Utility Plant Related		(1,356	)		(802	)		422
Tangible Property Repairs		(11,298	)		(10,156	)		(7,763	)
State Income Taxes – Net		1,364			1,173			1,207
Other		(33	)		188			49
Total Income Tax (Benefit) Expense	$	(4,119	)	$	(3,140	)	$	924

	(Thousands of Dollars)
	Years Ended December 31,
	2020			2019			2018
Current:
Federal	$	(4,281	)	$	(3,822	)	$	(188	)
State		2,598			2,246			2,073
Deferred:
Federal		(1,490	)		(726	)		(338	)
State		(871	)		(761	)		(545	)
Investment Tax Credits		(75	)		(77	)		(78	)
Total Income Tax (Benefit) Expense	$	(4,119	)	$	(3,140	)	$	924

As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for regulatory accounting treatment of income tax benefits associated with the adoption of tangible property regulations issued by the IRS as well as prospective recognition of the income tax benefits for the immediate deduction of repair costs on tangible property (see Note 2 – Rate and Regulatory Matters). This results in significant reductions in the Company’s effective income tax rate, current income tax (benefit) expense and deferred income tax (benefit) expense.

Index

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. The components of the net deferred tax liability are as follows:

	(Thousands of Dollars)
	December 31,
	2020			2019
Utility Plant Related	$	56,868		$	50,608
Customer Advances		(3,626	)		(3,661	)
Employee Benefits		7,339			6,543
Investment Tax Credits		445			519
Other		271			399
Total Accumulated Deferred Income Taxes	$	61,297		$	54,408

The Company’s federal income tax returns for the tax years 2014 through 2017 were selected for examination by the IRS, which included the tax year in which the Company had adopted the final IRS tangible property regulations and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. As a result of the audit examination, the Company agreed to certain modifications of its accounting method for expenditures that qualify as deductible repairs. In 2019, the Company paid $2.7 million in income taxes and $0.1 million in interest in connection with the conclusion of the 2014 through 2017 federal income tax return audits. As of December 31, 2020, the Company has reduced its income tax reserve provision and interest expense liability to $0.5 million and $0.1 million, respectively.

The statutory review periods for federal income tax returns for the years prior to 2017 have been closed. Other than the effects of the provision against refundable taxes discussed above, there are no unrecognized tax benefits resulting from prior period tax positions.