Note 9: Income Taxes

Provisions for Federal and State Income Taxes reflected as operating expenses in the accompanying consolidated statements of earnings for the years ended December 31, 2016, 2015 and 2014 are shown in the table below:


	($000’s)
	2016		2015			2014
Current Income Tax Provision
Federal	$	—	$	—		$	—
State		—		3,530			(387	)

Total Current Income Taxes		—		3,530			(387	)

Deferred Income Provision
Federal		11,209		12,413			10,809
State		4,145		(500	)		3,573

Total Deferred Income Taxes		15,354		11,913			14,382

Total Income Tax Expense	$	15,354	$	15,443		$	13,995

The differences between the Company’s provisions for Income Taxes and the provisions calculated at the statutory federal tax rate, expressed in percentages, are shown below:


	2016			2015			2014
Statutory Federal Income Tax Rate		34	%		34	%		34	%
Income Tax Effects of:
State Income Taxes, net		4			5			2
Utility Plant Differences		(1	)		(2	)		(1	)
Tax Credits		(1	)		(1	)		—
Other, net		—			1			1

Effective Income Tax Rate		36	%		37	%		36	%

Temporary differences which gave rise to deferred tax assets and liabilities in 2016 and 2015, are shown below:


Temporary Differences (000’s)	2016		2015
Deferred Tax Assets
Retirement Benefit Obligations	$	56,804	$	43,543
Net Operating Loss Carryforwards		23,921		10,500
Tax Credit Carryforwards		3,365		2,677
Other, net		1,426		4,019

Total Deferred Tax Assets	$	85,516	$	60,739

Deferred Tax Liabilities
Utility Plant Differences	$	169,240	$	142,412
Regulatory Assets & Liabilities		10,594		5,445
Other, net		3,629		348

Total Deferred Tax Liabilities		183,463		148,205

Net Deferred Tax Liabilities	$	97,947	$	87,466

The Company is subject to federal and state income taxes as well as various other business taxes. The Company accounts for income taxes in accordance with the FASB Codification guidance on Income Taxes which requires an asset and liability approach for the financial accounting and reporting of income taxes. Significant judgments and estimates are required in determining the current and deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities reflect its best assessment of estimated future taxes to be paid. Periodically, the Company assesses the realization of its deferred tax assets and liabilities and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts and circumstances that gave rise to the revision become known.

The Company filed its tax returns for the year ended December 31, 2015 with the Internal Revenue Service in September 2016 and generated additional federal net operating loss (NOL) carryforward assets principally due to current tax repair deductions, tax depreciation and research and development deductions. The Company has recorded in 2016 a benefit of approximately $0.7 million for New Hampshire business enterprise tax credits utilized in filing the Company’s 2015 tax returns. For the year ended December 31, 2016, the Company generated additional $9.9 million and $2.1 million of federal and state NOL carryforward assets, respectively in the calculation of its provisions for income taxes for the period. As of December 31, 2016, the Company had recorded cumulative federal and state NOL carryforward assets of $23.9 million to offset against taxes payable in future periods. If unused, the Company’s NOL carryforward assets will begin to expire in 2029. In addition, at December 31, 2016, the Company had $3.4 million of cumulative alternative minimum tax credits, general business tax credit and other state tax credit carryforwards to offset future income taxes payable.

The Company evaluated its tax positions at December 31, 2016 in accordance with the FASB Codification, and has concluded that no adjustment for recognition, derecognition, settlement and foreseeable future events to any tax liabilities or assets as defined by the FASB Codification is required. The Company remains subject to examination by Federal, Maine, Massachusetts, and New Hampshire tax authorities for the tax periods ended December 31, 2013; December 31, 2014; and December 31, 2015.