Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure

INCOME TAXES

Income Tax Expense

The following table is a summary of income tax expense for the years ended December 31:

(in millions)	2022		2021		2020
Current tax expense	$	50.2	$	93.9	$	49.2
Deferred income taxes, net	278.5		111.0		182.2
ITCs	(5.8)		(4.6)		(3.5)
Total income tax expense	$	322.9	$	200.3	$	227.9

Statutory Rate Reconciliation

The provision for income taxes for each of the years ended December 31 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to income before income taxes as a result of the following:

	2022				2021				2020
			Effective				Effective				Effective
(in millions)	Amount		Tax Rate		Amount		Tax Rate		Amount		Tax Rate
Statutory federal income tax	$	363.5	21.0	%	$	315.1	21.0	%	$	299.9	21.0	%
State income taxes net of federal tax benefit	109.7		6.3	%	96.1		6.4	%	90.5		6.3	%
Wind PTCs	(107.6)		(6.2)	%	(81.3)		(5.4)	%	(51.5)		(3.6)	%
Federal excess deferred tax amortization (1)	(36.9)		(2.1)	%	(37.3)		(2.5)	%	(36.7)		(2.6)	%
AFUDC–Equity	(6.2)		(0.4)	%	(3.8)		(0.3)	%	(4.4)		(0.3)	%
ITC restored	(5.8)		(0.3)	%	(4.6)		(0.3)	%	(3.5)		(0.2)	%
Federal excess deferred tax amortization – Wisconsin unprotected (2)	(0.8)		—	%	(77.9)		(5.2)	%	(57.6)		(4.0)	%
Other, net	7.0		0.3	%	(6.0)		(0.3)	%	(8.8)		(0.7)	%
Total income tax expense	$	322.9	18.6	%	$	200.3	13.4	%	$	227.9	15.9	%

(1)    The Tax Legislation required our regulated utilities to remeasure their deferred income taxes and we began to amortize the resulting excess protected deferred income taxes beginning in 2018 in accordance with normalization requirements. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

(2)    In accordance with the rate order received from the PSCW in December 2019, our Wisconsin utilities are amortizing these unprotected deferred tax benefits over periods ranging from two years to four years, to reduce near-term rate impacts to their customers. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

See Note 26, Regulatory Environment, for more information about the impact of the Tax Legislation and the Wisconsin rate orders.

Deferred Income Tax Assets and Liabilities

The components of deferred income taxes as of December 31 were as follows:

(in millions)	2022		2021
Deferred tax assets
Tax gross up – regulatory items	$	459.0	$	469.5
Future tax benefits	187.7		104.6
Deferred revenues	86.8		97.8
Other	190.2		205.9
Total deferred tax assets	923.7		877.8
Valuation allowance	(1.2)		(1.2)
Net deferred tax assets	$	922.5	$	876.6
Deferred tax liabilities
Property-related	$	4,072.5	$	3,909.0
Investment in affiliates	839.7		648.6
Employee benefits and compensation	219.5		170.6
Deferred costs – plant retirements	212.8		223.9
Other	203.6		233.0
Total deferred tax liabilities	5,548.1		5,185.1
Deferred tax liability, net	$	4,625.6	$	4,308.5

Consistent with ratemaking treatment, deferred taxes related to our regulated utilities in the table above are offset for temporary differences that have related regulatory assets and liabilities.

The components of net deferred tax assets associated with federal and state tax benefit carryforwards as of December 31, 2022 and 2021 are summarized in the tables below:

2022 (in millions)	Gross Value		Deferred Tax Effect		Valuation Allowance		Earliest Year of Expiration
Future tax benefits as of December 31, 2022
Federal tax credit	$	—	$	176.4	$	—	2041
State net operating loss	72.6		4.5		(1.2)		2032
Other state benefits	—		6.8		—		2023
Balance as of December 31, 2022	$	72.6	$	187.7	$	(1.2)

2021 (in millions)	Gross Value		Deferred Tax Effect		Valuation Allowance		Earliest Year of Expiration
Future tax benefits as of December 31, 2021
Federal tax credit	$	—	$	91.5	$	—	2041
State net operating loss	72.0		4.4		(1.2)		2031
Other state benefits	—		8.7		—		2023
Balance as of December 31, 2021	$	72.0	$	104.6	$	(1.2)

Unrecognized Tax Benefits

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

(in millions)	2022		2021		2020
Balance as of January 1	$	6.8	$	11.9	$	17.9
Additions for tax positions of prior years	0.3		—		1.6
Additions based on tax positions related to the current year	0.4		1.6		0.1
Reductions for tax positions of prior years	(1.2)		(6.7)		(7.7)
Balance as of December 31	$	6.3	$	6.8	$	11.9

The amount of unrecognized tax benefits as of December 31, 2022 and 2021, excludes deferred tax assets related to uncertainty in income taxes of $1.3 million and $1.2 million, respectively. As of December 31, 2022 and 2021, the net amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations was $5.1 million and $5.7 million, respectively.

Interest accrued related to unrecognized tax benefits is as follows:

(in millions)	2022		2021		2020
Balance as of January 1	$	0.1	$	0.5	$	0.8
Interest expense (income) related to unrecognized tax benefits	0.4		(0.4)		(0.3)
Balance as of December 31	$	0.5	$	0.1	$	0.5

For the years ended December 31, 2022, 2021, and 2020, we recognized no penalties related to unrecognized tax benefits in our consolidated income statements. At December 31, 2022 and 2021, we had no amounts accrued for penalties related to unrecognized tax benefits.

Although analysis of our unrecognized tax benefits is ongoing, the potential estimated decrease in the total amounts of unrecognized tax benefits within the next 12 months is approximately $2.3 million associated with statutes of limitations on certain tax years. We do not anticipate any significant increases in the total amounts of unrecognized tax benefits within the next 12 months.

We file income tax returns in the United States federal jurisdiction and state tax returns based on income in our major state operating jurisdictions of Wisconsin, Illinois, Michigan, and Minnesota. We also file tax returns in other state and local jurisdictions with varying statutes of limitations. As of December 31, 2022, with a few exceptions, we were subject to examination by federal and state or local tax authorities for the 2017 through 2022 tax years in our major operating jurisdictions as follows:

Jurisdiction	Years
Federal	2019–2022
Illinois	2017–2022
Michigan	2018–2022
Minnesota	2018–2022
Wisconsin	2018–2022