INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax expense (benefit) consisted of the following:

	Federal		State		Total
2021
Current	$	—	$	3,446	$	3,446
Deferred	3,322		(2,676)		646
Total income tax	$	3,322	$	770	$	4,092
2020
Current	$	—	$	3	$	3
Deferred	14,692		(2,677)		12,015
Total income tax	$	14,692	$	(2,674)	$	12,018
2019
Current	$	—	$	3	$	3
Deferred	15,582		2,086		17,668
Total income tax	$	15,582	$	2,089	$	17,671

The Company's 2021, 2020, and 2019 qualified tax repairs and maintenance deductions totaled $125.5 million, $164.0 million, and $70.0 million, respectively.

At December 31, 2021, the Company had U.S. federal and U.S. state tax net operating loss carryforwards of approximately $130.3 million and $175.8 million respectively. The U.S. federal and U.S. state net operating loss carryforwards will both expire at various dates beginning in tax year 2028.

As of December 31, 2021, the California Enterprise Zone (EZ) credit was $4.2 million net of federal tax benefit for qualified property purchased before January 1, 2015, and placed in service before January 1, 2016. The Company has carry-forward California EZ credits of $2.2 million net of federal tax benefit. Unused State of California EZ credits can carry-forward until 2024.

The difference between the recorded and the statutory income tax expense is reconciled in the table below:

	2021		2020		2019
Statutory income tax	$	22,065	$	22,858	$	16,965
Increase (reduction) in taxes due to:
State income taxes net of federal tax benefit	7,334		7,598		5,639
Effect of regulatory treatment of fixed asset differences	(6,327)		(9,201)		(3,696)
Investment tax credits	(74)		(74)		(74)
AFUDC equity	(891)		(1,392)		(1,870)
Stock based stock compensation	791		523		302
TCJA refund	(19,417)		(9,470)		—
Other	611		1,176		405
Total income tax	$	4,092	$	12,018	$	17,671

The effect of regulatory treatment of fixed asset differences includes estimated repair and maintenance deductions and asset related flow through items.

On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the TCJA. Among other provisions, the TCJA reduces the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018 and eliminated bonus depreciation for utilities. The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

During 2021, the Company analyzed its deferred tax balances, tax regulatory asset and tax regulatory liability based on 2018 GRC approved rates. As of December 31, 2021, the TCJA refund liability was $91.5 million. The Company continued working with other state regulators to finalize the refund to ensure compliance with federal normalization rules.

The deferred tax assets and deferred tax liabilities as of December 31, 2021 and 2020, are presented in the following table:

	2021		2020
Deferred tax assets:
Developer deposits for contributions in aid of construction	$	31,777	$	29,491
Net operating loss carryforward and tax credits	24,908		37,326
Pension liability	13,570		12,031
Income tax regulatory liability	26,565		41,151
Operating leases liabilities	4,310		4,372
Other	2,439		2,812
Total deferred tax assets	103,569		127,183
Deferred tax liabilities:
Property related basis and depreciation differences	362,139		350,923
WRAM/MCBA and interim rates balancing accounts	22,124		39,107
Operating lease-right to use asset	4,286		4,362
Other	13,965		8,823
Total deferred tax liabilities	402,514		403,215
Net deferred tax liabilities	$	298,945	$	276,032

A valuation allowance was not required at December 31, 2021 and 2020. Based on historical taxable income and future taxable income projections over the period in which the deferred assets are deductible, management believes it is more likely than not that the Company will realize the benefits of the deductible differences.

The following table reconciles the changes in unrecognized tax benefits for the periods ended December 31 2021, 2020, and 2019:

	2021		2020		2019
Balance at beginning of year	$	13,960	$	11,008	$	9,716
Additions for tax positions taken during current year	1,890		2,952		1,292
Balance at end of year	$	15,850	$	13,960	$	11,008

The Company does not expect a material change in its unrecognized tax benefits within the next 12 months. The component of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2021, was $4.1 million, with the remaining balance representing the potential deferral of taxes to later years.

The Company's federal income tax years subject to an examination are from 2012 to 2021 and the state income tax years subject to an examination are from 2012 to 2021.