Note 4. Income Taxes

For continuing operations, the statutory U.S. federal income tax rate reconciles to Questar Gas’ effective income tax rate as follows:

Nine Months Ended September 30,	2018			2017
U.S. statutory rate		21.0	%		35.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		3.7			3.1
Reversal of excess deferred income taxes		(4.6	)		—
State legislative change		(1.0	)		—
Other, net		(0.6	)		(0.2	)
Effective tax rate		18.5	%		37.9	%

The 2017 Tax Reform Act reduced the statutory federal income tax rate to 21% beginning in January 2018. Accordingly, current income taxes, and deferred income taxes that originate in 2018, are being recorded at the new 21% rate. Deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. For the nine months ended September 30, 2018, Questar Gas has recorded an estimate of the portion of excess deferred income tax amortization expected to occur in 2018. The reversal of these excess deferred income taxes will impact the effective tax rate, and may ultimately impact rates charged to customers. As described in Note 8 to the Financial Statements, Questar Gas decreased revenue and increased regulatory liabilities to offset these deferred tax impacts in accordance with applicable regulatory commission orders or formula rate mechanisms.

Questar Gas continues to evaluate the changes in accelerated depreciation for tax purposes and state conformity to the provisions of the 2017 Tax Reform Act. As of September 30, 2018, Questar Gas has applied the provisions of recently proposed regulations addressing the availability of federal bonus depreciation for the period beginning after September 27, 2017 through December 31, 2017. The application of these proposed regulations had no impact on income tax expense as the changes in, and remeasurement of, deferred tax liabilities were recorded as increases to regulatory liabilities of $4.4 million. These amounts represent Questar Gas’ best estimate based on available information, and could be subject to change based on additional guidance in yet to be finalized regulations. See Note 4 to the Financial Statements in Questar Gas’ Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the impacts of the 2017 Tax Reform Act.