Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Line Items]

Income Taxes

Income TaxesCMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.

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	2021				2020				2019
CMS Energy, including Consumers
Income from continuing operations before income taxes		$	823			$	809			$	764
Income tax expense at statutory rate		173				170				160
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		39				44				46
TCJA excess deferred taxes1		(50)				(35)				(31)
Production tax credits		(40)				(28)				(20)
Accelerated flow-through of regulatory tax benefits2		(28)				(13)				(13)
Research and development tax credits, net3		(3)				(11)				(2)
Refund of alternative minimum tax sequestration4		—				(9)				—
Other, net		4				(3)				(9)
Income tax expense		$	95			$	115			$	131
Effective tax rate		11.5		%		14.2		%		17.1		%
Consumers
Income from continuing operations before income taxes		$	1,024			$	989			$	928
Income tax expense at statutory rate		215				208				195
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		54				47				53
TCJA excess deferred taxes1		(50)				(35)				(31)
Accelerated flow-through of regulatory tax benefits2		(28)				(13)				(13)
Production tax credits		(33)				(19)				(12)
Research and development tax credits, net3		(3)				(11)				(2)
Other, net		1				(4)				(5)
Income tax expense		$	156			$	173			$	185
Effective tax rate		15.2		%		17.5		%		19.9		%

1In September 2020, the MPSC authorized Consumers to accelerate the amortization of a regulatory liability associated with unprotected, non‑property-related excess deferred income taxes resulting from the TCJA. The regulatory liability, which was previously scheduled to be amortized through 2029, will now be fully amortized by the end of 2022.

2In September 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated with the cost to remove gas plant assets. These tax benefits, which were previously scheduled to be amortized through 2025, will now be fully amortized by the end of 2022.

3In March 2020, CMS Energy finalized a study of research and development tax credits for tax years 2012 through 2018. As a result, in 2020, CMS Energy, including Consumers, recognized a $9 million increase in the credit, net of reserves for uncertain tax positions. Of this amount, $8 million was recognized at Consumers.

4In January 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years prior to 2018. As a result, in 2020, CMS Energy recognized a $9 million income tax benefit for sequestered amounts related to its 2017 tax return. CMS Energy received the refund in April 2020.

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

In Millions
Years Ended December 31	2021			2020			2019
CMS Energy, including Consumers
Current income taxes
Federal		$	(1)		$	(35)		$	(31)
State and local		1			(2)			28
		$	—		$	(37)		$	(3)
Deferred income taxes
Federal		49			100			84
State and local		49			57			29
		$	98		$	157		$	113
Deferred income tax credit		(3)			(5)			21
Tax expense		$	95		$	115		$	131
Consumers
Current income taxes
Federal		$	(13)		$	3		$	107
State and local		15			(7)			41
		$	2		$	(4)		$	148
Deferred income taxes
Federal		103			115			(10)
State and local		54			67			26
		$	157		$	182		$	16
Deferred income tax credit		(3)			(5)			21
Tax expense		$	156		$	173		$	185

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

In Millions
December 31	2021			2020
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards		$	332		$	483
Net regulatory tax liability		349			372
Reserves and accruals		32			62
Total deferred income tax assets		$	713		$	917
Valuation allowance		(2)			(1)
Total deferred income tax assets, net of valuation allowance		$	711		$	916
Deferred income tax liabilities
Plant, property, and equipment		$	(2,395)		$	(2,287)
Employee benefits		(399)			(364)
Securitized costs		(46)			(53)
Gas inventory		(22)			(24)
Other		(59)			(51)
Total deferred income tax liabilities		$	(2,921)		$	(2,779)
Total net deferred income tax liabilities		$	(2,210)		$	(1,863)
Consumers
Deferred income tax assets
Net regulatory tax liability		$	349		$	372
Tax loss and credit carryforwards		134			216
Reserves and accruals		24			24
Total deferred income tax assets		$	507		$	612
Deferred income tax liabilities
Plant, property, and equipment		$	(2,341)		$	(2,230)
Employee benefits		(388)			(365)
Securitized costs		(46)			(53)
Gas inventory		(22)			(24)
Other		(50)			(34)
Total deferred income tax liabilities		$	(2,847)		$	(2,706)
Total net deferred income tax liabilities		$	(2,340)		$	(2,094)

Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements.

Presented in the following table are the tax loss and credit carryforwards at December 31, 2021:

In Millions
	Tax Attribute			Expiration
CMS Energy, including Consumers
Federal net operating loss carryforwards		$	3	None
State net operating loss carryforwards		55		2030
Local net operating loss carryforwards		3		2024 – 2040
General business credits		264		2034 – 2041
Federal charitable contribution carryforwards		6		2025
State charitable contribution carryforwards		1		2025
Total tax attributes		$	332
Consumers
Federal net operating loss carryforwards		$	2	None
State net operating loss carryforwards		43		2030
General business credits		83		2034-2041
Federal charitable contribution carryforwards		5		2025
State charitable contribution carryforwards		1		2025
Total tax attributes		$	134

CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

In 2021, the sale of EnerBank to Regions Bank resulted in utilization of most of the federal net operating loss carryforwards. EnerBank is not included in CMS Energy’s Michigan tax filing, therefore state net operating loss carryforwards were not impacted by the sale of EnerBank.

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

In Millions
Years Ended December 31	2021			2020			2019
CMS Energy, including Consumers
Balance at beginning of period		$	25		$	23		$	19
Additions for current-year tax positions		2			1			1
Additions for prior-year tax positions		—			3			3
Reductions for prior-year tax positions		—			(2)			—
Balance at end of period		$	27		$	25		$	23
Consumers
Balance at beginning of period		$	31		$	34		$	28
Additions for current-year tax positions		3			1			1
Additions for prior-year tax positions		—			4			5
Reductions for prior-year tax positions		—			(8)			—
Balance at end of period		$	34		$	31		$	34

If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. A trial is anticipated in 2022 with the Michigan Tax Tribunal related to the methodology of state apportionment for Consumers’ electricity sales to MISO; however, a final conclusion is not anticipated in the next 12 months.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2021, 2020, or 2019.

The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2018 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013 and subsequent years remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2021 were adequate for all years.

Consumers Energy Company

Income Taxes [Line Items]

Income Taxes

Income TaxesCMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.

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	2021				2020				2019
CMS Energy, including Consumers
Income from continuing operations before income taxes		$	823			$	809			$	764
Income tax expense at statutory rate		173				170				160
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		39				44				46
TCJA excess deferred taxes1		(50)				(35)				(31)
Production tax credits		(40)				(28)				(20)
Accelerated flow-through of regulatory tax benefits2		(28)				(13)				(13)
Research and development tax credits, net3		(3)				(11)				(2)
Refund of alternative minimum tax sequestration4		—				(9)				—
Other, net		4				(3)				(9)
Income tax expense		$	95			$	115			$	131
Effective tax rate		11.5		%		14.2		%		17.1		%
Consumers
Income from continuing operations before income taxes		$	1,024			$	989			$	928
Income tax expense at statutory rate		215				208				195
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect		54				47				53
TCJA excess deferred taxes1		(50)				(35)				(31)
Accelerated flow-through of regulatory tax benefits2		(28)				(13)				(13)
Production tax credits		(33)				(19)				(12)
Research and development tax credits, net3		(3)				(11)				(2)
Other, net		1				(4)				(5)
Income tax expense		$	156			$	173			$	185
Effective tax rate		15.2		%		17.5		%		19.9		%

1In September 2020, the MPSC authorized Consumers to accelerate the amortization of a regulatory liability associated with unprotected, non‑property-related excess deferred income taxes resulting from the TCJA. The regulatory liability, which was previously scheduled to be amortized through 2029, will now be fully amortized by the end of 2022.

2In September 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated with the cost to remove gas plant assets. These tax benefits, which were previously scheduled to be amortized through 2025, will now be fully amortized by the end of 2022.

3In March 2020, CMS Energy finalized a study of research and development tax credits for tax years 2012 through 2018. As a result, in 2020, CMS Energy, including Consumers, recognized a $9 million increase in the credit, net of reserves for uncertain tax positions. Of this amount, $8 million was recognized at Consumers.

4In January 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years prior to 2018. As a result, in 2020, CMS Energy recognized a $9 million income tax benefit for sequestered amounts related to its 2017 tax return. CMS Energy received the refund in April 2020.

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

In Millions
Years Ended December 31	2021			2020			2019
CMS Energy, including Consumers
Current income taxes
Federal		$	(1)		$	(35)		$	(31)
State and local		1			(2)			28
		$	—		$	(37)		$	(3)
Deferred income taxes
Federal		49			100			84
State and local		49			57			29
		$	98		$	157		$	113
Deferred income tax credit		(3)			(5)			21
Tax expense		$	95		$	115		$	131
Consumers
Current income taxes
Federal		$	(13)		$	3		$	107
State and local		15			(7)			41
		$	2		$	(4)		$	148
Deferred income taxes
Federal		103			115			(10)
State and local		54			67			26
		$	157		$	182		$	16
Deferred income tax credit		(3)			(5)			21
Tax expense		$	156		$	173		$	185

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

In Millions
December 31	2021			2020
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards		$	332		$	483
Net regulatory tax liability		349			372
Reserves and accruals		32			62
Total deferred income tax assets		$	713		$	917
Valuation allowance		(2)			(1)
Total deferred income tax assets, net of valuation allowance		$	711		$	916
Deferred income tax liabilities
Plant, property, and equipment		$	(2,395)		$	(2,287)
Employee benefits		(399)			(364)
Securitized costs		(46)			(53)
Gas inventory		(22)			(24)
Other		(59)			(51)
Total deferred income tax liabilities		$	(2,921)		$	(2,779)
Total net deferred income tax liabilities		$	(2,210)		$	(1,863)
Consumers
Deferred income tax assets
Net regulatory tax liability		$	349		$	372
Tax loss and credit carryforwards		134			216
Reserves and accruals		24			24
Total deferred income tax assets		$	507		$	612
Deferred income tax liabilities
Plant, property, and equipment		$	(2,341)		$	(2,230)
Employee benefits		(388)			(365)
Securitized costs		(46)			(53)
Gas inventory		(22)			(24)
Other		(50)			(34)
Total deferred income tax liabilities		$	(2,847)		$	(2,706)
Total net deferred income tax liabilities		$	(2,340)		$	(2,094)

Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements.

Presented in the following table are the tax loss and credit carryforwards at December 31, 2021:

In Millions
	Tax Attribute			Expiration
CMS Energy, including Consumers
Federal net operating loss carryforwards		$	3	None
State net operating loss carryforwards		55		2030
Local net operating loss carryforwards		3		2024 – 2040
General business credits		264		2034 – 2041
Federal charitable contribution carryforwards		6		2025
State charitable contribution carryforwards		1		2025
Total tax attributes		$	332
Consumers
Federal net operating loss carryforwards		$	2	None
State net operating loss carryforwards		43		2030
General business credits		83		2034-2041
Federal charitable contribution carryforwards		5		2025
State charitable contribution carryforwards		1		2025
Total tax attributes		$	134

CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

In 2021, the sale of EnerBank to Regions Bank resulted in utilization of most of the federal net operating loss carryforwards. EnerBank is not included in CMS Energy’s Michigan tax filing, therefore state net operating loss carryforwards were not impacted by the sale of EnerBank.

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

In Millions
Years Ended December 31	2021			2020			2019
CMS Energy, including Consumers
Balance at beginning of period		$	25		$	23		$	19
Additions for current-year tax positions		2			1			1
Additions for prior-year tax positions		—			3			3
Reductions for prior-year tax positions		—			(2)			—
Balance at end of period		$	27		$	25		$	23
Consumers
Balance at beginning of period		$	31		$	34		$	28
Additions for current-year tax positions		3			1			1
Additions for prior-year tax positions		—			4			5
Reductions for prior-year tax positions		—			(8)			—
Balance at end of period		$	34		$	31		$	34

If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. A trial is anticipated in 2022 with the Michigan Tax Tribunal related to the methodology of state apportionment for Consumers’ electricity sales to MISO; however, a final conclusion is not anticipated in the next 12 months.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2021, 2020, or 2019.

The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2018 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013 and subsequent years remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2021 were adequate for all years.