Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2020 represents, in all material respects, the current status of other income tax matters except to the extent noted below and are incorporated herein by reference.

Difference between the statutory rate and ETR:

	Six Months Ended June 30
	2021		2020 (a)
Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	3.6		3.7
(Decreases) increases in tax from:
Wind PTCs	(15.1)		(9.8)
Plant regulatory differences (b)	(4.5)		(4.7)
Other (net)	(0.6)		(0.7)
Effective income tax rate	4.4	%	9.5	%

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

(b)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.

Federal Audits — 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 Years	Expiration
2014 — 2016	January 2022
2017	September 2021

Additionally, the statute of limitations related to a federal tax loss carryback claim filed in 2020 has been extended. Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.

State Audits — PSCo is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of June 30, 2021, PSCo’s earliest open tax year subject to examination by state taxing authorities under applicable statutes of limitations is 2009. As of June 30, 2021, there are no state income tax audits in progress.

Unrecognized Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which deductibility is highly certain, but for which there is uncertainty about the timing. A change in the timing of deductibility would not affect the ETR but would accelerate the payment to the taxing authority.

Unrecognized tax benefits — permanent vs temporary:

(Millions of Dollars)	June 30, 2021		Dec. 31, 2020
Unrecognized tax benefit — Permanent tax positions	$	8	$	7
Unrecognized tax benefit — Temporary tax positions	2		2
Total unrecognized tax benefit	$	10	$	9

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

(Millions of Dollars)	June 30, 2021		Dec. 31, 2020
NOL and tax credit carryforwards	$	(9)	$	(8)

As the IRS and state audits resume, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $3 million in the next 12 months.

Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.

Interest payable related to unrecognized tax benefits:

(Millions of Dollars)	June 30, 2021		Dec. 31, 2020
Payable for interest related to unrecognized tax benefits at beginning of period	$	—	$	(1)
Interest benefit related to unrecognized tax benefits	—		1
Payable for interest related to unrecognized tax benefits at end of period	$	—	$	—

No amounts were accrued for penalties related to unrecognized tax benefits as of June 30, 2021 or Dec. 31, 2020.