Income Taxes

6 Months Ended

Jun. 30, 2020

The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.

The provision for income taxes is shown in the tables below:


	Three Months Ended June 30
	2020		2019
Income tax expense	$	1,442	$	4,808


	Six Months Ended June 30
	2020		2019
Income tax (benefit) expense	$	(3,408)	$	2,645

The income tax expense decreased $3.4 million to $1.4 million for the three months ended June 30, 2020 as compared to $4.8 million for the three months ended June 30, 2019. The decrease was mainly due to a decrease in operating income of $17.4 million for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

The income tax expense decreased $6.0 million to an income tax benefit of $3.4 million for the six months ended June 30, 2020 as compared to income tax expense of $2.6 million for the six months ended June 30, 2019. The decrease was mainly due to a decrease in operating income of $25.4 million for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

The Company's effective tax rate for the six months ended June 30, 2020 is 18.5%.

For the year ended December 31, 2018, the Company recorded a re-measurement of its deferred tax balances (related mostly to timing differences for plant-related items). The final impact of the Tax Cuts and Jobs Act (TCJA) may differ from the recorded amounts, possibly materially, due to regulatory decisions that could differ from the Company’s determination of how the impacts of the TCJA are allocated between customers and shareholders. In addition, changes in interpretations, guidance on legislative intent, and any changes in accounting standards for income taxes in response to the TCJA could also impact the recorded amounts.

The Company is continuing to work with state regulators to finalize the customer net refund of $121.0 million to ensure compliance with federal normalization rules and will record any adjustments based on state regulator's decisions.

The Company had unrecognized tax benefits of approximately $12.4 million and $10.6 million as of June 30, 2020 and 2019, respectively. Included in the balance of unrecognized tax benefits, is approximately $3.0 million and $3.1 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.

During the six months ended June 30, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferral of certain payroll taxes, technical corrections to tax depreciation methods for qualified improvement property, net operating loss carryback periods, alternative minimum tax credit refunds and modifications to the net interest deduction limitations which are not expected to have a material impact to the Company’s consolidated financial statements. The Company evaluated the provisions of the CARES Act and determined that it did not have a material effect on the Company's consolidated financial statements as of June 30, 2020.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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