INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income Tax Expense

The following table is a summary of income tax expense for each of the years ended December 31:

(in millions)	2021		2020		2019
Current tax expense (benefit)	$	(18.3)	$	49.8	$	(66.1)
Deferred income taxes, net	51.1		5.1		125.5
ITCs	(1.6)		(0.4)		(0.3)
Total income tax expense	$	31.2	$	54.5	$	59.1

Statutory Rate Reconciliation

The provision for income taxes for each of the years ended December 31 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to income before income taxes as a result of the following:

	2021				2020				2019
(in millions)	Amount		Effective Tax Rate		Amount		Effective Tax Rate		Amount		Effective Tax Rate
Statutory federal income tax	$	55.1	21.0	%	$	58.0	21.0	%	$	51.2	21.0	%
State income taxes net of federal tax benefit	16.3		6.2	%	16.9		6.1	%	15.1		6.2	%
Federal excess deferred tax amortization – Wisconsin unprotected (1)	(33.0)		(12.6)	%	(12.7)		(4.6)	%	—		—	%
Federal excess deferred tax amortization (2)	(5.2)		(2.0)	%	(5.1)		(1.8)	%	(4.6)		(1.9)	%
AFUDC – Equity	(1.9)		(0.7)	%	(2.5)		(0.9)	%	(1.2)		(0.5)	%
Other, net	(0.1)		—	%	(0.1)		(0.1)	%	(1.4)		(0.6)	%
Total income tax expense	$	31.2	11.9	%	$	54.5	19.7	%	$	59.1	24.2	%

(1)    In accordance with the rate order received from the PSCW in December 2019, we are amortizing these unprotected deferred tax benefits over periods ranging from two years to four years, to reduce near-term rate impacts to our customers. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

(2)    The Tax Legislation required us to remeasure our deferred income taxes and we began to amortize the resulting excess protected deferred income taxes beginning in 2018 in accordance with normalization requirements. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

See Note 23, Regulatory Environment, for more information about the impact of the Tax Legislation and the Wisconsin rate orders.

Deferred Income Tax Assets and Liabilities

The components of deferred income taxes as of December 31 were as follows:

(in millions)	2021		2020
Deferred tax assets
Tax gross up – regulatory items	$	102.4	$	106.5
Future tax benefits	8.7		33.3
Other	20.5		22.2
Total deferred tax assets	$	131.6	$	162.0
Deferred tax liabilities
Property-related	822.1		749.1
Employee benefits and compensation	49.5		44.6
Other	42.2		51.0
Total deferred tax liabilities	913.8		844.7
Deferred tax liability, net	$	782.2	$	682.7

Consistent with rate-making treatment, deferred taxes in the table above are offset for temporary differences that have related regulatory assets and liabilities.

The components of net deferred tax assets associated with federal tax benefit carryforwards as of December 31, 2021 and 2020 are summarized in the tables below:

2021 (in millions)	Gross Value		Deferred Tax Effect		Earliest Year of Expiration
Future tax benefits as of December 31, 2021
Federal tax credit	$	—	$	8.7	2041
Balance as of December 31, 2021	$	—	$	8.7

2020 (in millions)	Gross Value		Deferred Tax Effect		Earliest Year of Expiration
Future tax benefits as of December 31, 2020
Federal tax credit	$	—	$	33.3	2040
Balance as of December 31, 2020	$	—	$	33.3

Unrecognized Tax Benefits

We had no unrecognized tax benefits at December 31, 2021 and 2020.

We do not expect any unrecognized tax benefits to affect our effective tax rate in periods after December 31, 2021.

For the years ended December 31, 2021, 2020, and 2019, we recognized no interest expense and no penalties related to unrecognized tax benefits in our income statements. At December 31, 2021 and 2020, we had no interest accrued and no penalties accrued related to unrecognized tax benefits on our balance sheets.

We do not anticipate any significant increases in the total amounts of unrecognized tax benefits within the next 12 months.

Our primary tax jurisdictions include federal and the state of Wisconsin. With a few exceptions, we are no longer subject to federal income tax examinations by the IRS for years prior to 2018. As of December 31, 2021, we were subject to examination by the Wisconsin taxing authority for tax years 2017 through 2021.