Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the amount of unrecognized tax benefit is as follows:



(Millions of Dollars)	Dec. 31, 2016		Dec. 31, 2015
Unrecognized tax benefit — Permanent tax positions	$	0.4	$	0.2
Unrecognized tax benefit — Temporary tax positions	4.9		4.3
Total unrecognized tax benefit	$	5.3	$	4.5

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:



(Millions of Dollars)	2016			2015			2014
Balance at Jan. 1	$	4.5		$	3.0		$	1.5
Additions based on tax positions related to the current year	0.5			1.9			1.9
Reductions based on tax positions related to the current year	—			(0.3		)	(0.2		)
Additions for tax positions of prior years	0.5			0.8			0.1
Reductions for tax positions of prior years	(0.2		)	(0.9		)	(0.2		)
Settlements with taxing authorities	—			—			(0.1		)
Balance at Dec. 31	$	5.3		$	4.5		$	3.0

Tax Benefits Associated with NOL and Tax Credit Carryforwards

The unrecognized tax benefit amounts were reduced by the tax benefits associated with NOL and tax credit carryforwards. The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:



(Millions of Dollars)	Dec. 31, 2016			Dec. 31, 2015
NOL and tax credit carryforwards	$	(1.2	)	$	(0.9	)

NOL and Tax Credit Carryforwards

Other Income Tax Matters — NOL amounts represent the amount of the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31 were as follows:



(Millions of Dollars)	2016		2015
Federal NOL carryforward	$	97	$	103
Federal tax credit carryforwards	4		5
State NOL carryforward	3		3

Schedule of Effective Income Tax Rate Reconciliation

2031.

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The following reconciles such differences for the years ending Dec. 31:



	2016		2015		2014
Federal statutory rate	35.0	%	35.0	%	35.0	%
Increases (decreases) in tax from:
State income taxes, net of federal income tax benefit	4.9		4.8		4.9
Change in unrecognized tax benefits	0.1		0.1		—
Tax credits recognized	(0.7	)	(0.7	)	(0.7	)
Regulatory differences — utility plant items	(0.7	)	(1.7	)	(1.6	)
Other, net	(0.3	)	(0.3	)	(0.1	)
Effective income tax rate	38.3	%	37.2	%	37.5	%

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2016			2015			2014
Current federal tax expense (benefit)	$	5,367		$	(4,715	)	$	(3,932	)
Current state tax expense	131			2,150			453
Current change in unrecognized tax expense	559			1,498			1,013
Deferred federal tax expense	29,588			40,580			38,321
Deferred state tax expense	8,212			6,675			8,042
Deferred change in unrecognized tax benefit	(432		)	(1,422		)	(967		)
Deferred investment tax credits	(523		)	(528		)	(527		)
Total income tax expense	$	42,902		$	44,238		$	42,403

The components of deferred income tax expense for the years ending Dec. 31 were:



(Thousands of Dollars)	2016			2015			2014
Deferred tax expense excluding items below	$	39,530		$	51,084		$	49,793
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	(2,112		)	(5,200		)	(4,346		)
Tax expense allocated to other comprehensive income and other	(50		)	(51		)	(51		)
Deferred tax expense	$	37,368		$	45,833		$	45,396

Schedule of Deferred Tax Assets and Liabilities

The components of the net deferred tax liability at Dec. 31 were as follows:



(Thousands of Dollars)	2016		2015
Deferred tax liabilities:
Difference between book and tax bases of property	$	412,071	$	382,592
Regulatory assets	75,392		78,233
Employee benefits	15,443		18,028
Other	9,949		10,190
Total deferred tax liabilities	$	512,855	$	489,043
Deferred tax assets:
NOL carryforward	$	35,216	$	37,508
Environmental remediation	25,842		37,938
Regulatory liabilities	5,779		9,328
Deferred investment tax credits	4,996		5,312
Tax credit carryforward	3,704		4,760
Other	6,725		3,134
Total deferred tax assets	$	82,262	$	97,980
Net deferred tax liability	$	430,593	$	391,063