Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Interest Payable related to Unrecognized Tax Benefits

Interest payable related to unrecognized tax benefits:



(Millions of Dollars)	2018			2017			2016
Payable for interest related to unrecognized tax benefits at Jan. 1	$	(0.3	)	$	(1.1	)	$	(0.4	)
Interest (expense) income related to unrecognized tax benefits	(0.4		)	0.8			(0.7		)
Payable for interest related to unrecognized tax benefits at Dec. 31	$	(0.7	)	$	(0.3	)	$	(1.1	)

Summary of Statute of Limitations Applicable to Open Tax Years

PSCo is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:



Tax Year(s)		Expiration
2009 - 2014		October 2019
2015		September 2019
2016		September 2020
2017		September 2021

Reconciliation of Unrecognized Tax Benefits

Unrecognized tax benefits - permanent vs temporary:



(Millions of Dollars)	Dec. 31, 2018		Dec. 31, 2017
Unrecognized tax benefit — Permanent tax positions	$	5.4	$	4.0
Unrecognized tax benefit — Temporary tax positions	4.9		6.1
Total unrecognized tax benefit	$	10.3	$	10.1

Changes in unrecognized tax benefits:



(Millions of Dollars)	2018			2017			2016
Balance at Jan. 1	$	10.1		$	19.7		$	17.4
Additions based on tax positions related to the current year	1.1			1.9			2.7
Reductions based on tax positions related to the current year	(0.3		)	(1.5		)	—
Additions for tax positions of prior years	0.4			4.4			0.5
Reductions for tax positions of prior years	(0.1		)	(14.4		)	(0.9		)
Settlements with taxing authorities	(0.9		)	—			—
Balance at Dec. 31	$	10.3		$	10.1		$	19.7

Tax Benefits Associated with NOL and Tax Credit Carryforwards

Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:



(Millions of Dollars)	Dec. 31, 2018			Dec. 31, 2017
NOL and tax credit carryforwards	$	(5.6	)	$	(4.0	)

NOL and Tax Credit Carryforwards

NOL amounts represent 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)	2018			2017
Federal NOL carryforward	$	—		$	67.6
Federal tax credit carryforwards	35.0			29.8
State NOL carryforwards	484.7			679.2
State tax credit carryforwards, net of federal detriment ^(a)	16.9			16.8
Valuation allowances for state credit carryforwards, net of federal benefit ^(b)	(8.9		)	(7.3		)


^(a)	State tax credit carryforwards are net of federal detriment of $4.5 million as of Dec. 31, 2018 and 2017.


^(b)	Valuation allowances for state tax credit carryforwards were net of federal benefit of $2.4 million and $1.9 million as of Dec. 31, 2018 and 2017, respectively.

Schedule of Effective Income Tax Rate Reconciliation

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.

Effective income tax rate for years ended Dec. 31:



	2018		2017 ^(a)		2016 ^(a)
Federal statutory rate	21.0	%	35.0	%	35.0	%
State income tax on pretax income, net of federal tax effect	3.7	%	3.0	%	3.0	%
Increases (decreases) in tax from:
Regulatory differences - ARAM ^(b)	(3.0	)	(0.1	)	(0.1	)
Regulatory differences - other utility plant items	(1.7	)	(0.9	)	(0.5	)
Amortization of excess nonplant deferred taxes	(1.4	)	—		—
Tax credits recognized, net of federal income tax expense	(0.9	)	(0.9	)	(0.7	)
Wind PTCs recognized	(0.6	)	—		—
Regulatory differences - Deferral of ARAM ^(c)	0.2		—		—
Change in unrecognized tax benefits	0.1		0.2		—
Tax reform	—		(2.4	)	—
Other, net	(0.3	)	(0.1	)	0.4
Effective income tax rate	17.1	%	33.8	%	37.1	%


^(a)	Prior periods have been reclassified to conform to current year presentation.


^(b)	ARAM is a method to flow back excess deferred taxes to customers.


^(c)	ARAM has been deferred when regulatory treatment has not been established. As Xcel Energy received direction from its regulatory commissions regarding the return of excess deferred taxes to customers, the ARAM deferral was reversed. This resulted in a reduction to tax expense with a corresponding reduction to revenue.

Schedule of Components of Income Tax Expense (Benefit)

Components of income tax expense for the years ended Dec. 31:



(Millions of Dollars)	2018			2017			2016
Current federal tax expense	$	79.5		$	40.4		$	45.3
Current state tax expense	14.2			14.6			8.7
Current change in unrecognized tax (benefit) expense	(1.3		)	(7.8		)	0.7
Deferred federal tax expense	4.9			176.4			195.1
Deferred state tax expense	16.6			22.5			27.2
Deferred change in unrecognized tax expense (benefit)	2.3			8.9			(0.3		)
Deferred ITCs	(2.5		)	(2.8		)	(2.8		)
Total income tax expense	$	113.7		$	252.2		$	273.9

Components of deferred income tax expense as of Dec. 31:



(Millions of Dollars)	2018			2017			2016
Deferred tax expense (benefit) excluding items below	$	74.8		$	(1,244.7	)	$	230.9
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	(50.6		)	1,453.1			(8.4		)
Tax expense allocated to other comprehensive income, net of adoption of ASU No. 2018-02, and other	(0.4		)	(0.6		)	(0.5		)
Deferred tax expense	$	23.8		$	207.8		$	222.0

Schedule of Deferred Tax Assets and Liabilities

Components of the net deferred tax liability as of Dec. 31:



(Millions of Dollars)	2018			2017
Deferred tax liabilities:
Differences between book and tax bases of property	$	1,860.1		$	1,790.1
Regulatory assets	251.1			252.4
Pension expense	33.9			60.0
Other	13.1			3.7
Total deferred tax liabilities	$	2,158.2		$	2,106.2

Deferred tax assets:
Regulatory liabilities	$	336.3		$	338.0
NOL carryforward	18.2			39.3
Tax credit carryforward	51.9			39.3
Tax credit valuation allowances	(8.9		)	—
Deferred ITCs	6.3			6.9
Other employee benefits	2.8			6.8
Rate refund	9.3			0.9
Other	23.0			30.5
Total deferred tax assets	$	438.9		$	461.7
Net deferred tax liability	$	1,719.3		$	1,644.5