Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule Of Effective Income Tax Rate Reconciliation

Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:



In Millions, Except Tax Rate
Years Ended December 31	2018				2017				2016
CMS Energy, including Consumers
Income from continuing operations before income taxes		$	774			$	886			$	826
Income tax expense at statutory rate		163				310				289
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect¹		46				26				37
Accelerated flow-through of regulatory tax benefits²		(39		)		(39		)		(39		)
TCJA excess deferred taxes³		(26		)		—				—
Production tax credits		(14		)		(8		)		(9		)
Research and development tax credits, net⁴		(11		)		(1		)		(2		)
Impact of the TCJA⁵		(4		)		148				—
Other, net		—				(12		)		(3		)
Income tax expense		$	115			$	424			$	273
Effective tax rate		14.9		%		47.9		%		33.1		%
Consumers
Income from continuing operations before income taxes		$	847			$	971			$	936
Income tax expense at statutory rate		178				340				328
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect¹		51				30				44
Accelerated flow-through of regulatory tax benefits²		(39		)		(39		)		(39		)
TCJA excess deferred taxes³		(26		)		—				—
Production tax credits		(12		)		(8		)		(9		)
Research and development tax credits, net⁴		(11		)		(1		)		(2		)
Impact of the TCJA⁵		1				33				—
Other, net		—				(16		)		(2		)
Income tax expense		$	142			$	339			$	320
Effective tax rate		16.8		%		34.9		%		34.2		%

In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy, including Consumers, recorded a $14 million income tax benefit in 2017. These tax benefits were net of reserves for uncertain tax positions and primarily attributable to Consumers. In April 2018, CMS Energy amended its 2013 Michigan Corporate Income Tax return and submitted a refund claim for taxes previously paid. In November 2018, the refund claim was denied by the State of Michigan. CMS Energy has submitted a petition for informal conference.

In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2018, 2017, and 2016.

In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a $1.8 billion regulatory liability. This regulatory liability relates to the excess deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the Internal Revenue Code. The normalization provisions require that the excess deferred taxes be refunded to customers over the remaining average service life of the associated assets. In January 2018, Consumers began to reduce this regulatory liability by crediting income tax expense. Consumers has fully reserved for the eventual refund of these excess deferred taxes that it has credited to income tax expense in a separate regulatory liability established by reducing revenue, and will continue to do so until these benefits are passed on to customers in accordance with an MPSC order, expected to be issued in 2019. At December 31, 2018, this reserve for refund of these excess deferred taxes totaled $35 million.


⁴	In March 2018, Consumers finalized a study of research and development tax credits for the tax years 2012 through 2016. As a result, Consumers recognized an $8 million increase in the credit, net of reserves for uncertain tax positions.


⁵	In December 2017, CMS Energy and Consumers recorded a reasonable estimate to measure and account for the impact of the TCJA. The 2018 amount includes the true-up of their estimate and elimination of $9 million valuation allowance on the sequestration of alternative minimum tax credits.

Significant Components Of Income Tax Expense

Presented in the following table are the significant components of income tax expense on continuing operations:



In Millions
Years Ended December 31	2018				2017			2016
CMS Energy, including Consumers
Current income taxes
Federal		$	(67	)		$	—		$	—
State and local		—				6			9
		$	(67	)		$	6		$	9
Deferred income taxes
Federal		$	112			$	368		$	200
State and local		58				36			47
		$	170			$	404		$	247
Deferred income tax credit		12				14			17
Tax expense		$	115			$	424		$	273
Consumers
Current income taxes
Federal		$	6			$	159		$	9
State and local		13				17			22
		$	19			$	176		$	31
Deferred income taxes
Federal		$	60			$	120		$	227
State and local		51				29			45
		$	111			$	149		$	272
Deferred income tax credit		12				14			17
Tax expense		$	142			$	339		$	320

Principal Components Of Deferred Income Tax Assets And Liailities

Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:



In Millions
December 31	2018				2017
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards		$	385			$	453
Net regulatory tax liability		395				411
Reserves and accruals		39				40
Total deferred income tax assets		$	819			$	904
Valuation allowance		(8		)		(15		)
Total deferred income tax assets, net of valuation allowance		$	811			$	889
Deferred income tax liabilities
Plant, property, and equipment		$	(1,955	)		$	(1,891	)
Employee benefits		(165		)		(96		)
Securitized costs		(65		)		(71		)
Gas inventory		(35		)		(37		)
Other		(78		)		(63		)
Total deferred income tax liabilities		$	(2,298	)		$	(2,158	)
Total net deferred income tax liabilities		$	(1,487	)		$	(1,269	)
Consumers
Deferred income tax assets
Net regulatory tax liability		$	395			$	411
Tax loss and credit carryforwards		64				101
Reserves and accruals		21				21
Total deferred income tax assets		$	480			$	533
Deferred income tax liabilities
Plant, property, and equipment		$	(1,943	)		$	(1,901	)
Employee benefits		(172		)		(105		)
Securitized costs		(65		)		(71		)
Gas inventory		(35		)		(37		)
Other		(74		)		(59		)
Total deferred income tax liabilities		$	(2,289	)		$	(2,173	)
Total net deferred income tax liabilities		$	(1,809	)		$	(1,640	)

Loss And Credit Carryforwards

Presented in the following table are the tax loss and credit carryforwards at December 31, 2018:



In Millions
	Gross Amount			Tax Attribute			Expiration
CMS Energy, including Consumers
Federal net operating loss carryforward		$	603		$	126	2034 – 2036
Local net operating loss carryforwards		406			4		2023 – 2036
General business credits		184			184		2018 – 2038
Alternative minimum tax credits		68			68		Not applicable
Federal capital loss carryover		12			2		2023
State capital loss carryover		10			1		2023
Total tax attributes					$	385
Consumers
Federal net operating loss carryforward		$	222		$	47	2034 – 2036
General business credits		17			17		2032 – 2038
Total tax attributes					$	64

Reconciliation Of Beginning And Ending Uncertain Tax Benefits

Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:



In Millions
Years Ended December 31	2018			2017				2016
CMS Energy, including Consumers
Balance at beginning of period		$	14		$	5			$	6
Additions for current-year tax positions		1			10				—
Additions for prior-year tax positions		4			—				—
Reductions for prior-year tax positions		—			(1		)		—
Settlements		—			—				(1		)
Balance at end of period		$	19		$	14			$	5
Consumers
Balance at beginning of period		$	21		$	5			$	6
Additions for current-year tax positions		2			17				—
Additions for prior-year tax positions		5			—				—
Reductions for prior-year tax positions		—			(1		)		—
Settlements		—			—				(1		)
Balance at end of period		$	28		$	21			$	5

Consumers Energy Company

Income Taxes [Line Items]